Form: 8-K

Current report

Documents

 
 
LOGO
 
Prudential Financial, Inc. (PRU)
 
 
Quarterly Financial Supplement
 
FINANCIAL SERVICES BUSINESSES
THIRD QUARTER 2002
 
Reference is made to Prudential Financial, Inc.'s filings with the Securities and Exchange Commission for general information, and consolidated financial information, regarding Prudential Financial, Inc., including its Closed Block Business.
 
 
November 5, 2002
                     

i

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

CONTENTS
 
    
Page
HIGHLIGHTS
     
Financial Highlights
   
1-2
Operations Highlights
   
3
FINANCIAL SERVICES BUSINESSES
     
Combined Statements of Operations
   
4
Combined Balance Sheets
   
5
Combining Statements of Operations by Division (Quarter)
   
6
Combining Statements of Operations by Division (Year-to-Date)
   
7
Combining Balance Sheets by Division
   
8
Short-Term Debt
   
9
Long-Term Debt
   
10
INSURANCE DIVISION
     
Combined Statements of Operations
   
11
Combining Statements of Operations (Quarter)
   
12
Combining Statements of Operations (Year-to-Date)
   
13
Individual Life and Annuities Sales Results and Assets Under Management
   
14
Individual Life and Annuities Segment Account Value Activity
   
15
Deferred Policy Acquisition Costs
   
16
Supplementary Information for Individual Life Insurance
   
17
Supplementary Information for Group Insurance
   
18
Supplementary Information for Property and Casualty Insurance
   
19
INVESTMENT DIVISION
     
Combined Statements of Operations
   
20
Combining Statements of Operations (Quarter)
   
21
Combining Statements of Operations (Year-to-Date)
   
22
Supplementary Revenue Information for Investment Management and Financial Advisory Segments
   
23
Assets Under Management for Investment Management and Advisory Services Operations
   
24
Mutual Funds and Wrap-fee Products Sales Results and Assets Under Management
   
25
Retirement Sales Results and Account Values
   
26
INTERNATIONAL INSURANCE AND INVESTMENTS DIVISION
     
Combined Statements of Operations
   
27
Combining Statements of Operations
   
28
Sales Results and Supplementary Information
   
29-30
INVESTMENT PORTFOLIO
     
Investment Portfolio Composition
   
31
Financial Services Businesses Investment Portfolio Composition—Japanese Insurance Operations and Excluding Japanese Insurance Operations
   
32
Financial Services Businesses Investment Results
   
33
Financial Services Businesses Investment Results—Japanese Insurance Operations
   
34
Financial Services Businesses Investment Results—Excluding Japanese Insurance Operations
   
35
RECLASSIFIED STATEMENTS OF OPERATIONS
   
36-37
KEY DEFINITIONS AND FORMULAS
   
38-40
RATINGS AND INVESTOR INFORMATION
   
41

ii

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

 
The Quarterly Financial Supplement for the period ended September 30, 2002 reflects the classification of results of our web-based business for the distribution of voluntary benefits, which we discontinued in the third quarter of 2002, as discontinued operations for all periods presented.
 
If you have any questions or need assistance with regard to this Quarterly Financial Supplement, please contact the Investor Relations unit.

iii

 
Prudential Financial, Inc.
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    
 
FINANCIAL HIGHLIGHTS
 
(in millions, except per share data)
 
Year-to-date
     
%
Change
          
2001
     
2002
  
2002
     
2001
             
3Q
     
4Q
     
1Q
     
2Q
     
3Q
  
                    
Financial Services Businesses:
                                   
                    
Pre-tax adjusted operating income by division:
                                   
448
 
   
474
 
   
-5
%
   
Insurance Division
   
82
 
   
71
 
   
205
 
   
167
 
   
76
 
240
 
   
158
 
   
52
%
   
Investment Division
   
(1
)
   
6
 
   
100
 
   
90
 
   
50
 
556
 
   
398
 
   
40
%
   
International Insurance and Investments Division
   
180
 
   
125
 
   
200
 
   
176
 
   
180
 
193
 
   
75
 
   
157
%
   
Corporate and other operations
   
(1
)
   
(24
)
   
23
 
   
49
 
   
121
 
  
              
  
  
  
  
1,437
 
   
1,105
 
   
30
%
   
Total pre-tax adjusted operating income
   
260
 
   
178
 
   
528
 
   
482
 
   
427
 
496
 
   
436
 
   
14
%
   
Income taxes(1)
   
155
 
   
71
 
   
193
 
   
176
 
   
127
 
  
              
  
  
  
  
941
 
   
669
 
   
41
%
   
Financial Services Businesses after-tax adjusted operating income
   
105
 
   
107
 
   
335
 
   
306
 
   
300
 
  
              
  
  
  
  
                    
Items excluded from adjusted operating income:
                                   
(581
)
   
(4
)
   
-14423
%
   
Realized investment losses, net of related adjustments
   
(322
)
   
(132
)
   
(96
)
   
(343
)
   
(142
)
(12
)
   
(122
)
   
90
%
   
Divested businesses
   
(40
)
   
(25
)
   
(8
)
   
10
 
   
(14
)
—  
 
   
(199
)
   
100
%
   
Demutualization costs and expenses(2)
   
(37
)
   
(389
)
   
—  
 
   
—  
 
   
—  
 
  
              
  
  
  
  
(593
)
   
(325
)
   
-82
%
   
Total items excluded from adjusted operating income, before income taxes
   
(399
)
   
(546
)
   
(104
)
   
(333
)
   
(156
)
(393
)
   
(371
)
   
-6
%
   
Income taxes, including mutual insurance company tax
   
(349
)
   
(23
)
   
(35
)
   
(125
)
   
(233
)
  
              
  
  
  
  
(200
)
   
46
 
   
-535
%
   
Total items excluded from adjusted operating income, after income taxes
   
(50
)
   
(523
)
   
(69
)
   
(208
)
   
77
 
  
              
  
  
  
  
741
 
   
715
 
   
4
%
   
Income (loss) from continuing operations (after-tax) of Financial Services Businesses
   
55
 
   
(416
)
   
266
 
   
98
 
   
377
 
9  
 
   
(10
)
   
190
%  
   
Income from discontinued operations, net of taxes
   
(3
)
   
13
 
   
(3
)
   
(3
)
   
15
 
  
              
  
  
  
  
750
 
   
705
 
   
6
%
   
Net income (loss) of Financial Services Businesses
   
52
 
   
(403
)
   
263
 
   
95
 
   
392
 
  
              
  
  
  
  
                    
Earnings per share of Common Stock (diluted):
                                   
1.67
 
   
1.15
 
          
Adjusted operating income
   
0.18
 
   
0.18
 
   
0.58
 
   
0.55
 
   
0.54
 
1.32
 
   
1.23
 
          
Income (loss) from continuing operations
   
0.09
 
   
(0.71
)
   
0.47
 
   
0.19
 
   
0.67
 
1.34
 
   
1.21
 
          
Net income (loss)
   
0.09
 
   
(0.69
)
   
0.46
 
   
0.19
 
   
0.70
 
582.3
 
   
583.6
 
          
Weighted average number of outstanding Common shares (diluted basis)
   
583.6
 
   
583.7
 
   
585.1
 
   
585.2
 
   
576.8
 
6.82
%
                 
Operating Return on Average Equity(3)
                 
7.23
%
   
6.71
%
   
6.49
%
                    
Reconciliation to Consolidated Net Income of Prudential Financial, Inc:
                                   
750
 
   
705
 
          
Net income (loss) of Financial Services Businesses (above)
   
52
 
   
(403
)
   
263
 
   
95
 
   
392
 
(363
)
   
(353
)
          
Net loss of Closed Block Business(4)
   
(332
)
   
(103
)
   
(110
)
   
(163
)
   
(90
)
  
              
  
  
  
  
387
 
   
352
 
          
Consolidated net income (loss)
   
(280
)
   
(506
)
   
153
 
   
(68
)
   
302
 
  
              
  
  
  
  
30
 
                 
Direct equity adjustments for earnings per share calculations
                 
7
 
   
14
 
   
9
 
(1)
 
Income taxes applicable to pre-tax adjusted operating income, which excludes the mutual insurance company tax for periods prior to demutualization.
(2)
 
Demutualization costs and expenses for the quarter ended December 31, 2001, include demutualization consideration of $340 million paid to former Canadian branch policyholders.
(3)
 
As a result of the establishment of the Closed Block Business concurrently with the demutualization on December 18, 2001, attributed equity as of the end of periods prior to December 31, 2001 is not comparable to attributed equity at that date and thereafter and, therefore, Operating Return on Average Equity is not presented for periods prior to 2002.
(4)
 
Amounts shown for the Closed Block Business represent results of the Traditional Participating Products segment for periods prior to effective date of demutualization.

Page 1

 
Prudential Financial, Inc.
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    
 
FINANCIAL HIGHLIGHTS
 
(in millions, except per share data)
 
Year-to-date
        
2001
   
2002
2002
   
2001
        
3Q
   
4Q
   
1Q
   
2Q
   
3Q
         
Financial Services Businesses Capitalization Data(1):
                         
         
Short-term debt
   
9,720
   
5,405
   
6,515
   
4,221
   
3,852
         
Long-term debt
   
2,983
   
3,554
   
3,350
   
3,003
   
3,077
         
Equity Security Units(2)
   
—  
   
690
   
690
   
690
   
690
         
Attributed Equity(3):
                         
         
Including accumulated other comprehensive income
   
14,683
   
19,646
   
19,453
   
20,258
   
21,039
         
Excluding unrealized gains and losses on investments
   
13,433
   
18,803
   
19,034
   
19,144
   
18,931
         
Excluding accumulated other comprehensive income
   
13,581
   
19,083
   
19,289
   
19,321
   
19,153
         
Total Capitalization:
                         
         
Including accumulated other comprehensive income
   
17,666
   
23,890
   
23,493
   
23,951
   
24,806
         
Excluding unrealized gains and losses on investments
   
16,416
   
23,047
   
23,074
   
22,837
   
22,698
         
Excluding accumulated other comprehensive income
   
16,564
   
23,327
   
23,329
   
23,014
   
22,920
         
Book value per share of Common Stock:
                         
         
Including accumulated other comprehensive income
        
33.59
   
33.25
   
34.72
   
37.03
         
Excluding unrealized gains and losses on investments
        
32.15
   
32.53
   
32.81
   
33.32
         
Excluding accumulated other comprehensive income
        
32.63
   
32.97
   
33.12
   
33.71
         
Number of diluted shares at end of period
        
584.8
   
585.1
   
583.4
   
568.1
         
Common Stock Price Range:
                         
35.75
        
High
        
33.19
   
32.09
   
35.75
   
32.99
27.35
        
Low
        
29.30
   
30.05
   
31.05
   
27.35
28.56
        
Close
        
33.19
   
31.05
   
33.36
   
28.56
         
Common Stock market capitalization(1)
        
19,369
   
18,143
   
19,448
   
16,235
(1)
 
As of end of period.
(2)
 
Guaranteed minority interest in Trust holding solely debentures of Parent, as reported in combined balance sheet.
(3)
 
During the third quarter of 2002, in conjunction with the Company’s review of its allocation of deferred taxes between the Closed Block and Financial Services Businesses, the Company determined that deferred taxes that had been included in the Closed Block Business were more appropriately reflected within the Financial Services Businesses. Accordingly, deferred taxes of $130 million were transferred from the Closed Block Business to the Financial Services Businesses resulting in a $130 million decrease in “Other attributed equity” of the Financial Services Businesses and a corresponding increase in “Other attributed equity” of the Closed Block Business.

Page 2

Prudential Financial, Inc.
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    
 
OPERATIONS HIGHLIGHTS
 
Year-to-date
        
2001
   
2002
2002
   
2001
        
3Q
   
4Q
   
1Q
   
2Q
   
3Q
         
Assets Under Management and Administration ($ billions)(1)(2):
                         
         
Assets Under Management :
                         
         
Managed by Investment Division(3):
                         
         
Investment Management Segment—Investment Management & Advisory Services
                         
         
Retail customers
   
92.8
   
96.5
   
92.3
   
84.8
   
77.3
         
Institutional customers
   
84.9
   
89.1
   
86.2
   
83.5
   
79.8
         
General account(4)
   
110.1
   
113.8
   
111.7
   
116.0
   
119.5
              
  
  
  
  
         
Total Investment Management and Advisory Services
   
287.8
   
299.4
   
290.2
   
284.3
   
276.6
         
Non-proprietary wrap-fee and other assets under management
   
36.6
   
41.2
   
41.9
   
38.2
   
32.7
              
  
  
  
  
         
Total managed by Investment Division
   
324.4
   
340.6
   
332.1
   
322.5
   
309.3
         
Managed by International Insurance and Investments Division(4):
   
40.5
   
39.3
   
38.0
   
37.9
   
42.7
         
Managed by Insurance Division
   
8.4
   
8.1
   
8.7
   
8.0
   
7.2
              
  
  
  
  
         
Total assets under management
   
373.3
   
388.0
   
378.8
   
368.4
   
359.2
         
Client assets under administration
   
190.9
   
201.6
   
201.2
   
188.4
   
173.7
              
  
  
  
  
         
Total assets under management and administration
   
564.2
   
589.6
   
580.0
   
556.8
   
532.9
              
  
  
  
  
         
Distribution Representatives(1):
                         
         
Prudential Agents
   
4,928
   
4,387
   
4,469
   
4,551
   
4,478
         
Financial Advisors:
                         
         
Domestic
   
5,618
   
5,430
   
5,131
   
4,779
   
4,440
         
International
   
748
   
729
   
728
   
725
   
707
              
  
  
  
  
         
Total
   
6,366
   
6,159
   
5,859
   
5,504
   
5,147
         
International Life Planners
   
3,999
   
4,104
   
4,098
   
4,207
   
4,353
         
Gibraltar Life Advisors
   
6,596
   
6,121
   
5,726
   
5,525
   
5,233
         
Distribution Representative Productivity:
                         
37
   
29
   
Prudential Agent productivity ($ thousands)
   
28
   
37
   
34
   
38
   
36
378
   
350
   
Financial Advisor productivity (domestic; $ thousands)
   
327
   
336
   
379
   
375
   
380
         
Third Party Distribution—Retail Products ($ millions)(5):
                         
154
   
221
   
Individual life insurance
   
123
   
31
   
25
   
93
   
36
85
   
8
   
Individual annuities
   
3
   
9
   
11
   
24
   
50
2,445
   
2,505
   
Mutual funds and wrap-fee products
   
491
   
537
   
456
   
1,019
   
970
(1)
 
As of end of period.
(2)
 
At fair market value.
(3)
 
Reflects reclassification of amounts by client category as of January 1, 2002, based on internal management criteria, which reduced the amount attributed to retail customers by $3.3 billion and increased the amounts attributed to institutional customers and the general account by $2.8 billion and $0.5 billion, respectively.
(4)
 
Reflects the Investment division’s assumption, as of June 30, 2002, of management of $3.5 billion of assets which were previously reflected in assets managed by the International Insurance and Investments division.
(5)
 
Represents statutory first year premiums and deposits for Individual Life Insurance and gross sales for Individual Annuities, Mutual Funds and Wrap-fee products.

Page 3

 
Prudential Financial, Inc.
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    
 
COMBINED STATEMENTS OF OPERATIONS—FINANCIAL SERVICES BUSINESSES
 
(in millions)
 
Year-to-date
     
%
Change
          
2001
     
2002
  
2002
     
2001
             
3Q
     
4Q
     
1Q
     
2Q
     
3Q
  
                    
Revenues(1):
                                   
6,998
 
   
5,866
 
   
19
%
   
Premiums
   
2,241
 
   
2,361
 
   
2,278
 
   
2,334
 
   
2,386
 
1,246
 
   
1,349
 
   
-8
%
   
Policy charges and fee income
   
474
 
   
454
 
   
434
 
   
412
 
   
400
 
3,934
 
   
3,941
 
   
0
%
   
Net investment income
   
1,288
 
   
1,303
 
   
1,251
 
   
1,356
 
   
1,327
 
3,163
 
   
3,264
 
   
-3
%
   
Commissions, investment management fees, and other income
   
992
 
   
1,092
 
   
1,095
 
   
1,057
 
   
1,011
 
  
              
  
  
  
  
15,341
 
   
14,420
 
   
6
%
   
Total revenues
   
4,995
 
   
5,210
 
   
5,058
 
   
5,159
 
   
5,124
 
  
              
  
  
  
  
                    
Benefits and Expenses(1):
                                   
6,849
 
   
5,963
 
   
15
%
   
Insurance and annuity benefits
   
2,279
 
   
2,296
 
   
2,206
 
   
2,317
 
   
2,326
 
1,263
 
   
1,236
 
   
2
%
   
Interest credited to policyholders’ account balances
   
432
 
   
434
 
   
414
 
   
415
 
   
434
 
156
 
   
278
 
   
-44
%
   
Interest expense
   
70
 
   
48
 
   
56
 
   
50
 
   
50
 
(1,068
)
   
(981
)
   
-9
%
   
Deferral of acquisition costs
   
(325
)
   
(344
)
   
(340
)
   
(358
)
   
(370
)
870
 
   
709
 
   
23
%
   
Amortization of acquisition costs
   
255
 
   
224
 
   
239
 
   
273
 
   
358
 
2,140
 
   
2,463
 
   
-13
%
   
Securities operations non-interest expenses
   
771
 
   
816
 
   
722
 
   
731
 
   
687
 
3,694
 
   
3,647
 
   
1
%
   
General and administrative expenses
   
1,253
 
   
1,558
 
   
1,233
 
   
1,249
 
   
1,212
 
  
              
  
  
  
  
13,904
 
   
13,315
 
   
4
%
   
Total benefits and expenses
   
4,735
 
   
5,032
 
   
4,530
 
   
4,677
 
   
4,697
 
  
              
  
  
  
  
1,437
 
   
1,105
 
   
30
%
   
Adjusted operating income before income taxes
   
260
 
   
178
 
   
528
 
   
482
 
   
427
 
  
              
  
  
  
  
                    
Items excluded from adjusted operating income before income taxes:
                                   
(581
)
   
3
 
   
-19441
%
   
Realized investment gains (losses), net of related adjustments
   
(326
)
   
(165
)
   
(101
)
   
(339
)
   
(141
)
—
 
   
(7
)
   
100
%
   
Related charges
   
4
 
   
33
 
   
5
 
   
(4
)
   
(1
)
  
              
  
  
  
  
(581
)
   
(4
)
   
-14423
%
   
Total realized investment losses, net of related adjustments
   
(322
)
   
(132
)
   
(96
)
   
(343
)
   
(142
)
  
              
  
  
  
  
(12)
 
   
(122
)
   
90
%
   
Divested businesses
   
(40
)
   
(25
)
   
(8
)
   
10
 
   
(14
)
—  
 
   
(199
)
   
100
%
   
Demutualization costs and expenses
   
(37
)
   
(389
)
   
—
 
   
—  
 
   
—  
 
  
              
  
  
  
  
(593
)
   
(325
)
   
-82
%
   
Total items excluded from adjusted operating income before income taxes
   
(399
)
   
(546
)
   
(104
)
   
(333
)
   
(156
)
  
              
  
  
  
  
844
 
   
780
 
   
8
%
   
Income (loss) from continuing operations before income taxes
   
(139
)
   
(368
)
   
424
 
   
149
 
   
271
 
103
 
   
65
 
   
58
%
   
Income tax expense (benefit)
   
(194
)
   
48
 
   
158
 
   
51
 
   
(106
)
  
              
  
  
  
  
741
 
   
715
 
   
4
%
   
Income (loss) from continuing operations, after-tax
   
55
 
   
(416
)
   
266
 
   
98
 
   
377
 
  
              
  
  
  
  
(1)
 
Revenues exclude realized investment gains, net of losses and related adjustments, and revenues of divested businesses. Benefits and expenses exclude charges related to realized investment gains, net of losses, benefits and expenses of divested businesses, and demutualization costs and expenses.

Page 4

 
Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

COMBINED BALANCE SHEETS—FINANCIAL SERVICES BUSINESSES
 
(in millions)
 
    
9/30/2001
   
12/31/2001
   
3/31/2002
   
6/30/2002
   
9/30/2002
Assets:
                         
Investments:
                         
Fixed maturities available for sale, at fair value
                         
(amortized cost $66,031; $67,276; $69,840; $70,745; $72,962)
   
68,018
   
68,880
   
70,687
   
72,700
   
76,815
Fixed maturities held to maturity, at amortized cost
                         
(fair value $555; $395; $373; $2,293; $2,385)
   
532
   
374
   
354
   
2,268
   
2,376
Trading account assets, at fair value
   
5,199
   
5,043
   
6,286
   
6,038
   
4,419
Equity securities available for sale, at fair value
                         
(cost $2,072; $1,671; $1,620; $1,748; $1,815)
   
2,026
   
1,688
   
1,687
   
1,868
   
1,714
Commercial loans
   
12,756
   
13,624
   
13,011
   
12,752
   
12,649
Policy loans
   
3,008
   
2,812
   
2,854
   
2,982
   
3,036
Securities purchased under agreements to resell
   
4,480
   
4,421
   
7,137
   
5,136
   
5,256
Cash collateral for borrowed securities
   
3,963
   
5,210
   
5,628
   
5,530
   
5,691
Other long-term investments
   
3,811
   
4,336
   
4,253
   
4,216
   
4,329
Short-term investments
   
2,773
   
2,972
   
3,095
   
2,848
   
2,082
    
  
  
  
  
Total investments
   
106,566
   
109,360
   
114,992
   
116,338
   
118,367
Cash and cash equivalents
   
13,209
   
16,900
   
10,282
   
8,344
   
9,115
Accrued investment income
   
977
   
1,059
   
1,027
   
1,069
   
1,084
Broker-dealer related receivables
   
9,119
   
7,802
   
7,017
   
7,091
   
5,486
Deferred policy acquisition costs
   
5,525
   
5,538
   
5,660
   
5,859
   
5,750
Other assets
   
13,798
   
13,488
   
15,692
   
16,213
   
14,699
Separate account assets
   
74,523
   
77,158
   
78,515
   
75,101
   
69,900
    
  
  
  
  
Total assets
   
223,717
   
231,305
   
233,185
   
230,015
   
224,401
    
  
  
  
  
Liabilities:
                         
Future policy benefits
   
40,729
   
39,752
   
38,403
   
40,319
   
41,395
Policyholders' account balances
   
37,936
   
37,944
   
37,559
   
38,916
   
40,325
Unpaid claims and claim adjustment expenses
   
3,478
   
3,408
   
3,353
   
3,352
   
3,363
Securities sold under agreements to repurchase
   
9,479
   
9,280
   
11,704
   
10,557
   
10,675
Cash collateral for loaned securities
   
6,264
   
7,650
   
8,256
   
8,959
   
7,645
Income taxes payable
   
1,550
   
1,085
   
1,102
   
1,609
   
1,967
Broker-dealer related payables
   
6,571
   
6,445
   
5,581
   
6,076
   
4,498
Securities sold but not yet purchased
   
3,057
   
2,791
   
4,561
   
3,185
   
2,417
Short-term debt
   
9,720
   
5,405
   
6,515
   
4,221
   
3,852
Long-term debt
   
2,983
   
3,554
   
3,350
   
3,003
   
3,077
Other liabilities
   
12,744
   
16,497
   
14,143
   
13,769
   
13,558
Separate account liabilities
   
74,523
   
77,158
   
78,515
   
75,101
   
69,900
    
  
  
  
  
Total liabilities
   
209,034
   
210,969
   
213,042
   
209,067
   
202,672
    
  
  
  
  
Guaranteed minority interest in Trust holding solely debentures of Parent
   
—  
   
690
   
690
   
690
   
690
Attributed Equity:
                         
Accumulated other comprehensive income
   
1,102
   
563
   
164
   
937
   
1,886
Other attributed equity
   
13,581
   
19,083
   
19,289
   
19,321
   
19,153
    
  
  
  
  
Total attributed equity
   
14,683
   
19,646
   
19,453
   
20,258
   
21,039
    
  
  
  
  
Total liabilities and attributed equity
   
223,717
   
231,305
   
233,185
   
230,015
   
224,401
    
  
  
  
  

Page 5

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

 
FINANCIAL SERVICES BUSINESSES COMBINING STATEMENTS OF OPERATIONS—BY DIVISION
 
(in millions)
 
    
Quarter Ended September 30, 2002
  
    
Total Financial Services Businesses
     
Insurance Division
       
Investment Division
       
International Insurance & Investments Division
       
Corporate and Other Operations
  
Revenues (1) :
                                         
Premiums
   
2,386
 
   
1,318
 
     
10
 
     
1,061
 
     
(3
)
Policy charges and fee income
   
400
 
   
342
 
     
15
 
     
46
 
     
(3
)
Net investment income
   
1,327
 
   
399
 
     
570
 
     
199
 
     
159
 
Commissions, investment management fees, and other income
   
1,011
 
   
57
 
     
866
 
     
111
 
     
(23
)
    
  
    
    
    
Total revenues
   
5,124
 
   
2,116
 
     
1,461
 
     
1,417
 
     
130
 
    
  
    
    
    
Benefits and Expenses (1):
                                         
Insurance and annuity benefits
   
2,326
 
   
1,276
 
     
220
 
     
830
 
     
—  
 
Interest credited to policyholders' account balances
   
434
 
   
163
 
     
247
 
     
24
 
     
—  
 
Interest expense
   
50
 
   
(2
)
     
4
 
     
—  
 
     
48
 
Deferral of acquisition costs
   
(370
)
   
(212
)
     
(8
)
     
(162
)
     
12
 
Amortization of acquisition costs
   
358
 
   
293
 
     
21
 
     
65
 
     
(21
)
Securities operations non-interest expenses
   
687
 
   
—  
 
     
576
 
     
107
 
     
4
 
General and administrative expenses
   
1,212
 
   
522
 
     
351
 
     
373
 
     
(34
)
    
  
    
    
    
Total benefits and expenses
   
4,697
 
   
2,040
 
     
1,411
 
     
1,237
 
     
9
 
    
  
    
    
    
Adjusted operating income before income taxes
   
427
 
   
76
 
     
50
 
     
180
 
     
121
 
    
  
    
    
    
    
Quarter Ended September 30, 2001
  
    
Total Financial Services Businesses
     
Insurance Division
       
Investment Division
       
International Insurance & Investments Division
       
Corporate and Other Operations
  
Revenues (1):
                                         
Premiums
   
2,241
 
   
1,219
 
     
(8
)
     
1,020
 
     
10
 
Policy charges and fee income
   
474
 
   
355
 
     
18
 
     
102
 
     
(1
)
Net investment income
   
1,288
 
   
375
 
     
611
 
     
170
 
     
132
 
Commissions, investment management fees, and other income
   
992
 
   
64
 
     
927
 
     
118
 
     
(117
)
    
  
    
    
    
Total revenues
   
4,995
 
   
2,013
 
     
1,548
 
     
1,410
 
     
24
 
    
  
    
    
    
Benefits and Expenses (1):
                                         
Insurance and annuity benefits
   
2,279
 
   
1,243
 
     
231
 
     
794
 
     
11
 
Interest credited to policyholders' account balances
   
432
 
   
153
 
     
250
 
     
28
 
     
1
 
Interest expense
   
70
 
   
—  
 
     
8
 
     
2
 
     
60
 
Deferral of acquisition costs
   
(325
)
   
(197
)
     
(12
)
     
(133
)
     
17
 
Amortization of acquisition costs
   
255
 
   
210
 
     
22
 
     
44
 
     
(21
)
Securities operations non-interest expenses
   
771
 
   
—  
 
     
653
 
     
125
 
     
(7
)
General and administrative expenses
   
1,253
 
   
522
 
     
397
 
     
370
 
     
(36
)
    
  
    
    
    
Total benefits and expenses
   
4,735
 
   
1,931
 
     
1,549
 
     
1,230
 
     
25
 
    
  
    
    
    
Adjusted operating income before income taxes
   
260
 
   
82
 
     
(1
)
     
180
 
     
(1
)
    
  
    
    
    
 
(1)
 
Revenues exclude realized investment gains, net of losses and related adjustments, and revenues of divested businesses. Benefits and expenses exclude charges related to realized investment gains, net of losses, benefits and expenses of divested businesses, and demutualization costs and expenses.

Page 6

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

FINANCIAL SERVICES BUSINESSES COMBINING STATEMENTS OF OPERATIONS—BY DIVISION
 
(in millions)
 
    
Nine Months Ended September 30, 2002
  
    
Total Financial Services Businesses
     
Insurance Division
       
Investment Division
       
International Insurance & Investments Division
       
Corporate and Other Operations
  
Revenues (1) :
                                         
Premiums
   
6,998
 
   
3,879
 
     
39
 
     
3,083
 
     
(3
)
Policy charges and fee income
   
1,246
 
   
1,050
 
     
53
 
     
152
 
     
(9
)
Net investment income
   
3,934
 
   
1,165
 
     
1,735
 
     
548
 
     
486
 
Commissions, investment management fees, and other income
   
3,163
 
   
176
 
     
2,734
 
     
402
 
     
(149
)
    
  
    
    
    
Total revenues
   
15,341
 
   
6,270
 
     
4,561
 
     
4,185
 
     
325
 
    
  
    
    
    
Benefits and Expenses (1):
                                         
Insurance and annuity benefits
   
6,849
 
   
3,731
 
     
648
 
     
2,412
 
     
58
 
Interest credited to policyholders' account balances
   
1,263
 
   
463
 
     
728
 
     
72
 
     
—  
 
Interest expense
   
156
 
   
(3
)
     
12
 
     
—  
 
     
147
 
Deferral of acquisition costs
   
(1,068
)
   
(624
)
     
(36
)
     
(460
)
     
52
 
Amortization of acquisition costs
   
870
 
   
693
 
     
69
 
     
174
 
     
(66
)
Securities operations non-interest expenses
   
2,140
 
   
—  
 
     
1,802
 
     
340
 
     
(2
)
General and administrative expenses
   
3,694
 
   
1,562
 
     
1,098
 
     
1,091
 
     
(57
)
    
  
    
    
    
Total benefits and expenses
   
13,904
 
   
5,822
 
     
4,321
 
     
3,629
 
     
132
 
    
  
    
    
    
Adjusted operating income before income taxes
   
1,437
 
   
448
 
     
240
 
     
556
 
     
193
 
    
  
    
    
    
    
Nine Months Ended September 30, 2001
  
    
Total Financial Services Businesses
     
Insurance Division
       
Investment Division
       
International Insurance & Investments Division
       
Corporate and Other Operations
  
Revenues (1):
                                         
Premiums
   
5,866
 
   
3,550
 
     
13
 
     
2,291
 
     
12
 
Policy charges and fee income
   
1,349
 
   
1,060
 
     
57
 
     
237
 
     
(5
)
Net investment income
   
3,941
 
   
1,155
 
     
1,890
 
     
349
 
     
547
 
Commissions, investment management fees, and other income
   
3,264
 
   
176
 
     
2,937
 
     
396
 
     
(245
)
    
  
    
    
    
Total revenues
   
14,420
 
   
5,941
 
     
4,897
 
     
3,273
 
     
309
 
    
  
    
    
    
Benefits and Expenses (1):
                                         
Insurance and annuity benefits
   
5,963
 
   
3,410
 
     
693
 
     
1,833
 
     
27
 
Interest credited to policyholders' account balances
   
1,236
 
   
461
 
     
727
 
     
47
 
     
1
 
Interest expense
   
278
 
   
2
 
     
25
 
     
6
 
     
245
 
Deferral of acquisition costs
   
(981
)
   
(609
)
     
(48
)
     
(390
)
     
66
 
Amortization of acquisition costs
   
709
 
   
588
 
     
66
 
     
117
 
     
(62
)
Securities operations non-interest expenses
   
2,463
 
   
—  
 
     
2,068
 
     
383
 
     
12
 
General and administrative expenses
   
3,647
 
   
1,615
 
     
1,208
 
     
879
 
     
(55
)
    
  
    
    
    
Total benefits and expenses
   
13,315
 
   
5,467
 
     
4,739
 
     
2,875
 
     
234
 
    
  
    
    
    
Adjusted operating income before income taxes
   
1,105
 
   
474
 
     
158
 
     
398
 
     
75
 
    
  
    
    
    
 
(1)
 
Revenues exclude realized investment gains, net of losses and related adjustments, and revenues of divested businesses. Benefits and expenses exclude charges related to realized investment gains, net of losses, benefits and expenses of divested businesses, and demutualization costs and expenses.

Page 7

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

FINANCIAL SERVICES BUSINESSES COMBINING BALANCE SHEETS—BY DIVISION
 
(in millions)
 
    
As of September 30, 2002
  
Assets:
   
Total Financial Services Businesses
   
Insurance Division
   
Investment Division
     
International Insurance & Investments Division
     
Corporate and Other Operations
  
Total investments
   
118,367
   
26,119
   
45,537
     
36,164
 
   
10,547
 
Broker-dealer related receivables
   
5,486
   
—  
   
4,304
     
885
 
   
297
 
Deferred policy acquisition costs
   
5,750
   
3,772
   
42
     
2,016
 
   
(80
)
Other assets
   
24,898
   
5,628
   
8,587
     
4,489
 
   
6,194
 
Separate account assets
   
69,900
   
29,655
   
40,378
     
483
 
   
(616
)
    
  
  
    
  
Total assets
   
224,401
   
65,174
   
98,848
     
44,037
 
   
16,342
 
    
  
  
    
  
Liabilities:
                               
Future policy benefits
   
41,395
   
4,989
   
12,243
     
23,728
 
   
435
 
Policyholders' account balances
   
40,325
   
14,438
   
15,946
     
9,923
 
   
18
 
Debt
   
6,929
   
245
   
3,175
     
996
 
   
2,513
 
Other liabilities
   
44,123
   
8,929
   
22,975
     
5,735
 
   
6,484
 
Separate account liabilities
   
69,900
   
29,655
   
40,378
     
483
 
   
(616
)
    
  
  
    
  
Total liabilities
   
202,672
   
58,256
   
94,717
     
40,865
 
   
8,834
 
    
  
  
    
  
Guaranteed minority interest in Trust holding solely debentures of Parent
   
690
   
—  
   
—  
     
—  
 
   
690
 
Attributed Equity:
                               
Accumulated other comprehensive income (loss)
   
1,886
   
946
   
846
     
219
 
   
(125
)
Other attributed equity
   
19,153
   
5,972
   
3,285
     
2,953
 
   
6,943
 
    
  
  
    
  
Total attributed equity
   
21,039
   
6,918
   
4,131
     
3,172
 
   
6,818
 
    
  
  
    
  
Total liabilities and attributed equity
   
224,401
   
65,174
   
98,848
     
44,037
 
   
16,342
 
    
  
  
    
  
    
As of December 31, 2001
  
Assets:
   
Total Financial Services Businesses
   
Insurance Division
   
Investment Division
     
International Insurance & Investments Division
     
Corporate and Other Operations
  
Total investments
   
109,360
   
24,126
   
45,579
     
29,841
 
   
9,814
 
Broker-dealer related receivables
   
7,802
   
—  
   
6,421
     
1,069
 
   
312
 
Deferred policy acquisition costs
   
5,538
   
3,919
   
66
     
1,615
 
   
(62
)
Other assets
   
31,447
   
4,496
   
9,215
     
8,454
 
   
9,282
 
Separate account assets
   
77,158
   
36,166
   
41,217
     
422
 
   
(647
)
    
  
  
    
  
Total assets
   
231,305
   
68,707
   
102,498
     
41,401
 
   
18,699
 
    
  
  
    
  
Liabilities:
                               
Future policy benefits
   
39,752
   
4,925
   
12,317
     
22,041
 
   
469
 
Policyholders' account balances
   
37,944
   
12,739
   
15,372
     
9,808
 
   
25
 
Debt
   
8,959
   
106
   
4,527
     
1,058
 
   
3,268
 
Other liabilities
   
47,156
   
8,505
   
24,980
     
5,429
 
   
8,242
 
Separate account liabilities
   
77,158
   
36,166
   
41,217
     
422
 
   
(647
)
    
  
  
    
  
Total liabilities
   
210,969
   
62,441
   
98,413
     
38,758
 
   
11,357
 
    
  
  
    
  
Guaranteed minority interest in Trust holding solely debentures of Parent
   
690
   
—  
   
—  
     
—  
 
   
690
 
Attributed Equity:
                               
Accumulated other comprehensive income (loss)
   
563
   
529
   
446
     
(171
)
   
(241
)
Other attributed equity
   
19,083
   
5,737
   
3,639
     
2,814
 
   
6,893
 
    
  
  
    
  
Total attributed equity
   
19,646
   
6,266
   
4,085
     
2,643
 
   
6,652
 
    
  
  
    
  
Total liabilities and attributed equity
   
231,305
   
68,707
   
102,498
     
41,401
 
   
18,699
 
    
  
  
    
  

Page 8

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

SHORT TERM DEBT—FINANCIAL SERVICES BUSINESSES
 
(in millions)
 
      
As of September 30, 2002
     
As of December 31, 2001
      
Prudential Financial, Inc.
     
The Prudential Insurance Co. of America(a)
   
Other Affiliates
   
Total
     
Prudential Financial, Inc.
     
The Prudential Insurance Co. of America(a)
   
Other Affiliates
   
Total
Borrowings by use of proceeds:
                                                
General corporate purposes
     
—  
     
328
   
—  
   
328
     
—  
     
222
   
—  
   
222
Investment related
     
—  
     
366
   
—  
   
366
     
—  
     
834
   
—  
   
834
Securities business related
     
—  
     
1,252
   
903
   
2,155
     
—  
     
1,639
   
1,484
   
3,123
Specified other businesses
     
—  
     
875
   
127
   
1,002
     
—  
     
1,141
   
14
   
1,155
Limited recourse and non-recourse borrowing
     
—  
     
—  
   
1
   
1
     
—  
     
—  
   
71
   
71
      
    
  
  
    
    
  
  
Total short-term debt
     
—  
     
2,821
   
1,031
   
3,852
     
—  
     
3,836
   
1,569
   
5,405
      
    
  
  
    
    
  
  
Borrowings by type:
                                                
Long-term debt due within one year
     
—  
     
552
   
—  
   
552
     
—  
     
753
   
—  
   
753
Commercial paper
     
—  
     
2,238
   
—  
   
2,238
     
—  
     
3,022
   
—  
   
3,022
Bank borrowings
     
—  
     
—  
   
720
   
720
     
—  
     
—  
   
1,324
   
1,324
Other short-term debt
     
—  
     
31
   
310
   
341
     
—  
     
61
   
174
   
235
      
    
  
  
    
    
  
  
Total general obligations
     
—  
     
2,821
   
1,030
   
3,851
     
—  
     
3,836
   
1,498
   
5,334
Limited recourse and non-recourse borrowing
     
—  
     
—  
   
1
   
1
     
—  
     
—  
   
71
   
71
      
    
  
  
    
    
  
  
Total short-term debt
     
—  
     
2,821
   
1,031
   
3,852
     
—  
     
3,836
   
1,569
   
5,405
      
    
  
  
    
    
  
  
 
(a)
 
Includes Prudential Funding, LLC.

Page 9

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

LONG TERM DEBT
 
(in millions)
 
    
As of September 30, 2002
    
General Corporate Purposes
       
Investment Related
     
Securities Business Related
     
Specified Other Businesses
     
Total General Obligations
   
Limited Recourse and non-Recourse
   
Total Borrowing
Financial Services Businesses:
                                             
Prudential Financial, Inc.:
                                             
Long-term fixed and floating rate notes
   
—  
 
     
—  
     
—  
     
—  
     
—  
   
—  
   
—  
Hybrid notes
   
—  
 
     
—  
     
—  
     
—  
     
—  
   
—  
   
—  
    
    
    
    
    
  
  
Total
   
—  
 
     
—  
     
—  
     
—  
     
—  
   
—  
   
—  
    
    
    
    
    
  
  
The Prudential Insurance Company of America (a):
                                             
Surplus notes
   
690
 
     
—  
     
—  
     
—  
     
690
   
—  
   
690
Long-term fixed and floating rate notes
   
600
 
     
737
     
481
     
—  
     
1,818
   
—  
   
1,818
Commercial paper backed by long-term credit agreements
   
—  
 
     
—  
     
—  
     
—  
     
—  
   
—  
   
—  
    
    
    
    
    
  
  
Total
   
1,290
 
     
737
     
481
     
—  
     
2,508
   
—  
   
2,508
    
    
    
    
    
  
  
Long-term debt of other affiliated companies
   
—  
 
     
—  
     
—  
     
—  
     
—  
   
569
   
569
    
    
    
    
    
  
  
Total long-term debt of Financial Services Businesses
   
1,290
 
     
737
     
481
     
—  
     
2,508
   
569
   
3,077
    
    
    
    
    
  
  
Ratio of long-term and short-term corporate debt to capitalization
   
8.3
%
                                      
    
                                     
Closed Block Business:
                                             
Limited recourse notes of Prudential Holdings, LLC
   
—  
 
     
—  
     
—  
     
—  
     
—  
   
1,750
   
1,750
    
    
    
    
    
  
  
    
As of December 31, 2001
    
General Corporate Purposes
       
Investment Related
     
Securities Business Related
     
Specified Other Businesses
     
Total General Obligations
   
Limited Recourse and non-Recourse
   
Total Borrowing
Financial Services Businesses:
                                             
Prudential Financial, Inc.:
                                             
Long-term fixed and floating rate notes
   
—  
 
     
—  
     
—  
     
—  
     
—  
   
—  
   
—  
Hybrid notes
   
—  
 
     
—  
     
—  
     
—  
     
—  
   
—  
   
—  
    
    
    
    
    
  
  
Total
   
—  
 
     
—  
     
—  
     
—  
     
—  
   
—  
   
—  
    
    
    
    
    
  
  
The Prudential Insurance Company of America (a):
                                             
Surplus notes
   
989
 
     
—  
     
—  
     
—  
     
989
   
—  
   
989
Long-term fixed and floating rate notes
   
1,456
 
     
586
     
—  
     
—  
     
2,042
   
—  
   
2,042
Commercial paper backed by long-term credit agreements
   
—  
 
     
—  
     
—  
     
—  
     
—  
   
—  
   
—  
    
    
    
    
    
  
  
Total
   
2,445
 
     
586
     
—  
     
—  
     
3,031
   
—  
   
3,031
    
    
    
    
    
  
  
Long-term debt of other affiliated companies
   
—  
 
     
—  
     
—  
     
—  
     
—  
   
523
   
523
    
    
    
    
    
  
  
Total long-term debt of Financial Services Businesses
   
2,445
 
     
586
     
—  
     
—  
     
3,031
   
523
   
3,554
    
    
    
    
    
  
  
Ratio of long-term and short-term corporate debt to capitalization
   
12.7
%
                                      
    
                                     
Closed Block Business:
                                             
Limited recourse notes of Prudential Holdings, LLC
   
—  
 
     
—  
     
—  
     
—  
     
—  
   
1,750
   
1,750
    
    
    
    
    
  
  
 
(a)
 
Includes Prudential Funding, LLC.

Page 10

Prudential Financial, Inc.
        
LOGO
Quarterly Financial Supplement
          
Third Quarter 2002
          
    
COMBINED STATEMENTS OF OPERATIONS—INSURANCE DIVISION
 
(in millions)
     

 
Year-to-date
     
%
Change
       
2001
     
2002
  
2002
     
2001
            
3Q
     
4Q
     
1Q
     
2Q
     
3Q
  
                 
Revenues (1):
                                   
3,879
 
   
3,550
 
   
9%
  
Premiums
   
1,219
 
   
1,279
 
   
1,252
 
   
1,309
 
   
1,318
 
1,050
 
   
1,060
 
   
-1%
  
Policy charges and fee income
   
355
 
   
363
 
   
358
 
   
350
 
   
342
 
1,165
 
   
1,155
 
   
1%
  
Net investment income
   
375
 
   
381
 
   
380
 
   
386
 
   
399
 
176
 
   
176
 
   
0%
  
Commissions, investment management fees, and other income
   
64
 
   
55
 
   
56
 
   
63
 
   
57
 
  
           
  
  
  
  
6,270
 
   
5,941
 
   
6%
  
Total revenues
   
2,013
 
   
2,078
 
   
2,046
 
   
2,108
 
   
2,116
 
  
           
  
  
  
  
                 
Benefits and Expenses (1):
                                   
3,731
 
   
3,410
 
   
9%
  
Insurance and annuity benefits
   
1,243
 
   
1,223
 
   
1,199
 
   
1,256
 
   
1,276
 
463
 
   
461
 
   
0%
  
Interest credited to policyholders' account balances
   
153
 
   
159
 
   
147
 
   
153
 
   
163
 
(3
)
   
2
 
   
-250%
  
Interest expense
   
—  
 
   
(1
)
   
—  
 
   
(1
)
   
(2
)
(624
)
   
(609
)
   
-2%
  
Deferral of acquisition costs
   
(197
)
   
(199
)
   
(194
)
   
(218
)
   
(212
)
693
 
   
588
 
   
18%
  
Amortization of acquisition costs
   
210
 
   
177
 
   
173
 
   
227
 
   
293
 
1,562
 
   
1,615
 
   
-3%
  
General and administrative expenses
   
522
 
   
648
 
   
516
 
   
524
 
   
522
 
  
           
  
  
  
  
5,822
 
   
5,467
 
   
6%
  
Total benefits and expenses
   
1,931
 
   
2,007
 
   
1,841
 
   
1,941
 
   
2,040
 
  
           
  
  
  
  
448
 
   
474
 
   
-5%
  
Adjusted operating income before income taxes
   
82
 
   
71
 
   
205
 
   
167
 
   
76
 
  
           
  
  
  
  
 
(1)
 
Revenues exclude realized investment gains, net of losses. Benefits and expenses exclude charges related to realized investment gains, net of losses.

Page 11

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

COMBINING STATEMENTS OF OPERATIONS—INSURANCE DIVISION
 
(in millions)
 
    
Quarter Ended September 30, 2002
  
    
Total Insurance Division
       
Individual Life and Annuities
       
Group Insurance
       
Property & Casualty Insurance
       
Individual Life and Annuities
  
                        
Individual Life
       
Individual Annuities
  
Revenues (1):
                                                    
Premiums
   
1,318
 
     
123
 
     
679
 
     
516
 
     
109
 
     
14
 
Policy charges and fee income
   
342
 
     
296
 
     
46
 
     
—  
 
     
248
 
     
48
 
Net investment income
   
399
 
     
212
 
     
147
 
     
40
 
     
104
 
     
108
 
Commissions, investment management fees, and other income
   
57
 
     
48
 
     
10
 
     
(1
)
     
34
 
     
14
 
    
    
    
    
    
    
Total revenues
   
2,116
 
     
679
 
     
882
 
     
555
 
     
495
 
     
184
 
    
    
    
    
    
    
Benefits and Expenses (1):
                                                    
Insurance and annuity benefits
   
1,276
 
     
189
 
     
674
 
     
413
 
     
152
 
     
37
 
Interest credited to policyholders' account balances
   
163
 
     
103
 
     
60
 
     
—  
 
     
37
 
     
66
 
Interest expense
   
(2
)
     
(2
)
     
—  
 
     
—  
 
     
(1
)
     
(1
)
Deferral of acquisition costs
   
(212
)
     
(110
)
     
(7
)
     
(95
)
     
(76
)
     
(34
)
Amortization of acquisition costs
   
293
 
     
197
 
     
1
 
     
95
 
     
92
 
     
105
 
General and administrative expenses
   
522
 
     
256
 
     
124
 
     
142
 
     
176
 
     
80
 
    
    
    
    
    
    
Total benefits and expenses
   
2,040
 
     
633
 
     
852
 
     
555
 
     
380
 
     
253
 
    
    
    
    
    
    
Adjusted operating income before income taxes
   
76
 
     
46
 
     
30
 
     
—  
 
     
115
 
     
(69
)
    
    
    
    
    
    
    
Quarter Ended September 30, 2001
  
    
Total Insurance Division
       
Individual Life and Annuities
       
Group Insurance
       
Property & Casualty Insurance
       
Individual Life and Annuities
  
                        
Individual Life
       
Individual Annuities
  
Revenues (1):
                                                    
Premiums
   
1,219
 
     
83
 
     
658
 
     
478
 
     
71
 
     
12
 
Policy charges and fee income
   
355
 
     
305
 
     
50
 
     
—  
 
     
248
 
     
57
 
Net investment income
   
375
 
     
202
 
     
134
 
     
39
 
     
95
 
     
107
 
Commissions, investment management fees, and other income
   
64
 
     
53
 
     
6
 
     
5
 
     
35
 
     
18
 
    
    
    
    
    
    
Total revenues
   
2,013
 
     
643
 
     
848
 
     
522
 
     
449
 
     
194
 
    
    
    
    
    
    
Benefits and Expenses (1):
                                                    
Insurance and annuity benefits
   
1,243
 
     
194
 
     
688
 
     
361
 
     
166
 
     
28
 
Interest credited to policyholders' account balances
   
153
 
     
96
 
     
57
 
     
—  
 
     
33
 
     
63
 
Interest expense
   
—
 
     
—  
 
     
—  
 
     
—  
 
     
—  
 
     
—  
 
Deferral of acquisition costs
   
(197
)
     
(98
)
     
(4
)
     
(95
)
     
(74
)
     
(24
)
Amortization of acquisition costs
   
210
 
     
111
 
     
—  
 
     
99
 
     
60
 
     
51
 
General and administrative expenses
   
522
 
     
256
 
     
114
 
     
152
 
     
188
 
     
68
 
    
    
    
    
    
    
Total benefits and expenses
   
1,931
 
     
559
 
     
855
 
     
517
 
     
373
 
     
186
 
    
    
    
    
    
    
Adjusted operating income before income taxes
   
82
 
     
84
 
     
(7
)
     
5
 
     
76
 
     
8
 
    
    
    
    
    
    
 
(1)
 
Revenues exclude realized investment gains, net of losses. Benefits and expenses exclude charges related to realized investment gains, net of losses.

Page 12

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

 
COMBINING STATEMENTS OF OPERATIONS—INSURANCE DIVISION
 
(in millions)
 
    
Nine Months Ended September 30, 2002
  
    
Total Insurance Division
     
Individual Life and Annuities
     
Group Insurance
       
Property & Casualty Insurance
       
Individual Life and Annuities
  
                    
Individual Life
       
Individual Annuities
  
Revenues (1):
                                                
Premiums
   
3,879
 
   
274
 
   
2,077
 
     
1,528
 
     
230
 
     
44
 
Policy charges and fee income
   
1,050
 
   
910
 
   
140
 
     
—  
 
     
750
 
     
160
 
Net investment income
   
1,165
 
   
618
 
   
430
 
     
117
 
     
310
 
     
308
 
Commissions, investment management fees, and other income
   
176
 
   
150
 
   
24
 
     
2
 
     
103
 
     
47
 
    
  
  
    
    
    
Total revenues
   
6,270
 
   
1,952
 
   
2,671
 
     
1,647
 
     
1,393
 
     
559
 
    
  
  
    
    
    
Benefits and Expenses (1):
                                                
Insurance and annuity benefits
   
3,731
 
   
511
 
   
2,034
 
     
1,186
 
     
409
 
     
102
 
Interest credited to policyholders' account balances
   
463
 
   
292
 
   
171
 
     
—  
 
     
106
 
     
186
 
Interest expense
   
(3
)
   
(2
)
   
(1
)
     
—  
 
     
(1
)
     
(1
)
Deferral of acquisition costs
   
(624
)
   
(319
)
   
(17
)
     
(288
)
     
(222
)
     
(97
)
Amortization of acquisition costs
   
693
 
   
406
 
   
(2
)
     
289
 
     
208
 
     
198
 
General and administrative expenses
   
1,562
 
   
759
 
   
383
 
     
420
 
     
531
 
     
228
 
    
  
  
    
    
    
Total benefits and expenses
   
5,822
 
   
1,647
 
   
2,568
 
     
1,607
 
     
1,031
 
     
616
 
    
  
  
    
    
    
Adjusted operating income before income taxes
   
448
 
   
305
 
   
103
 
     
40
 
     
362
 
     
(57
)
    
  
  
    
    
    
    
Nine Months Ended September 30, 2001
  
    
Total Insurance Division
     
Individual Life and Annuities
     
Group Insurance
       
Property & Casualty Insurance
       
Individual Life and Annuities
  
                    
Individual Life
       
Individual Annuities
  
Revenues (1):
                                                
Premiums
   
3,550
 
   
292
 
   
1,869
 
     
1,389
 
     
254
 
     
38
 
Policy charges and fee income
   
1,060
 
   
941
 
   
119
 
     
—  
 
     
755
 
     
186
 
Net investment income
   
1,155
 
   
626
 
   
407
 
     
122
 
     
291
 
     
335
 
Commissions, investment management fees, and other income
   
176
 
   
151
 
   
17
 
     
8
 
     
94
 
     
57
 
    
  
  
    
    
    
Total revenues
   
5,941
 
   
2,010
 
   
2,412
 
     
1,519
 
     
1,394
 
     
616
 
    
  
  
    
    
    
Benefits and Expenses(1):
                                                
Insurance and annuity benefits
   
3,410
 
   
573
 
   
1,872
 
     
965
 
     
496
 
     
77
 
Interest credited to policyholders' account balances
   
461
 
   
298
 
   
163
 
     
—  
 
     
102
 
     
196
 
Interest expense
   
2
 
   
3
 
   
(1
)
     
—  
 
     
1
 
     
2
 
Deferral of acquisition costs
   
(609
)
   
(301
)
   
(11
)
     
(297
)
     
(227
)
     
(74
)
Amortization of acquisition costs
   
588
 
   
290
 
   
1
 
     
297
 
     
177
 
     
113
 
General and administrative expenses
   
1,615
 
   
820
 
   
339
 
     
456
 
     
603
 
     
217
 
    
  
  
    
    
    
Total benefits and expenses
   
5,467
 
   
1,683
 
   
2,363
 
     
1,421
 
     
1,152
 
     
531
 
    
  
  
    
    
    
Adjusted operating income before income taxes
   
474
 
   
327
 
   
49
 
     
98
 
     
242
 
     
85
 
    
  
  
    
    
    
 
(1)
 
Revenues exclude realized investment gains, net of losses. Benefits and expenses exclude charges related to realized investment gains, net of losses.

Page 13

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

 
INSURANCE DIVISION—INDIVIDUAL LIFE AND ANNUITIES SALES RESULTS AND ASSETS UNDER MANAGEMENT
 
(in millions)
 
Year-to-date
      
2001
  
2002
2002
  
2001
      
3Q
  
4Q
  
1Q
  
2Q
  
3Q
       
INDIVIDUAL LIFE INSURANCE SALES (1):
                    
120
  
166
  
Variable life
  
46
  
50
  
44
  
41
  
35
43
  
8
  
Universal life
  
5
  
4
  
11
  
16
  
16
107
  
182
  
Corporate-owned life insurance
  
117
  
17
  
10
  
76
  
21
45
  
32
  
Term life
  
11
  
11
  
13
  
15
  
17
 
     
 
 
 
 
315
  
388
  
Total
  
179
  
82
  
78
  
148
  
89
 
     
 
 
 
 
       
ANNUITY SALES AND ACCOUNT VALUES
                    
       
Variable Annuities:
                    
18,689
  
21,059
  
Beginning total account value
  
19,523
  
17,190
  
18,689
  
18,435
  
16,802
1,119
  
941
  
Sales
  
274
  
330
  
374
  
406
  
339
(1,770)
  
(1,808)
  
Surrenders, withdrawals and exchange redemptions
  
(552)
  
(548)
  
(597)
  
(627)
  
(546)
(3,077)
  
(3,002)
  
Change in market value, interest credited, and other activity (2)
  
(2,055)
  
1,717
  
(31)
  
(1,412)
  
(1,634)
 
     
 
 
 
 
14,961
  
17,190
  
Ending total account value
  
17,190
  
18,689
  
18,435
  
16,802
  
14,961
 
     
 
 
 
 
(651)
  
(867)
  
Net redemptions
  
(278)
  
(218)
  
(223)
  
(221)
  
(207)
 
     
 
 
 
 
       
Fixed Annuities:
                    
2,975
  
2,926
  
Beginning total account value
  
2,872
  
2,865
  
2,975
  
2,909
  
3,048
442
  
89
  
Sales
  
32
  
31
  
37
  
181
  
224
(137)
  
(172)
  
Surrenders, withdrawals and exchange redemptions
  
(48)
  
(44)
  
(50)
  
(45)
  
(42)
(20)
  
22
  
Interest credited and other activity (2)
  
9
  
123
  
(53)
  
3
  
30
 
     
 
 
 
 
3,260
  
2,865
  
Ending account value
  
2,865
  
2,975
  
2,909
  
3,048
  
3,260
 
     
 
 
 
 
305
  
(83)
  
Net sales (redemptions)
  
(16)
  
(13)
  
(13)
  
136
  
182
 
     
 
 
 
 
       
SALES BY DISTRIBUTION CHANNEL
                    
       
Life Insurance: (1)
                    
161
  
167
  
Prudential Agents
  
56
  
51
  
53
  
55
  
53
154
  
221
  
Third party distribution
  
123
  
31
  
25
  
93
  
36
 
     
 
 
 
 
315
  
388
  
Total
  
179
  
82
  
78
  
148
  
89
 
     
 
 
 
 
       
Variable and Fixed Annuities (3):
                    
1,134
  
846
  
Prudential Agents
  
257
  
298
  
337
  
405
  
392
342
  
176
  
Financial Advisors
  
46
  
54
  
63
  
158
  
121
85
  
8
  
Third-party distributors
  
3
  
9
  
11
  
24
  
50
 
     
 
 
 
 
1,561
  
1,030
  
Total
  
306
  
361
  
411
  
587
  
563
 
     
 
 
 
 
 
(1)
 
Statutory first year premiums and deposits.
(2)
 
The quarter ended March 31, 2002 includes decreases in policyholder account balances of $45 million for variable annuities and $56 million for fixed annuities due to the distribution of policy credits, subsequently paid out in cash, as demutualization consideration in connection with the Company's demutualization. The quarter ended December 31, 2001 includes increases in policyholder account values of $429 million for variable annuities and $157 million for fixed annuities as a result of policyholder credits issued in connection with the Company's demutualization, as well as a decrease in policyholder account values of $50 million in fixed annuities transferred to the Closed Block Business upon its establishment.
(3)
 
Amounts represent gross sales.

Page 14

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

 
INSURANCE DIVISION—INDIVIDUAL LIFE AND ANNUITIES SEGMENT ACCOUNT VALUE ACTIVITY
 
(in millions)
 
Year-to-date
        
2001
   
2002
2002
   
2001
        
3Q
   
4Q
   
1Q
   
2Q
   
3Q
         
INDIVIDUAL LIFE INSURANCE:
                         
         
Policyholders' Account Balances:
                         
3,826
   
3,526
   
Beginning balance
   
3,628
   
3,664
   
3,826
   
3,924
   
3,992
676
   
566
   
Premiums and deposits
   
194
   
206
   
227
   
226
   
223
68
   
65
   
Interest credited
   
20
   
25
   
20
   
23
   
25
(430)
   
(505)
   
Surrenders and withdrawals
   
(159)
   
(201)
   
(135)
   
(138)
   
(157)
33
   
82
   
Net transfers from separate account
   
24
   
7
   
14
   
14
   
5
(59)
   
(45)
   
Policy charges
   
(17)
   
(14)
   
(16)
   
(22)
   
(21)
(81)
   
(25)
   
Benefits and other
   
(26)
   
139
   
(12)
   
(35)
   
(34)
  
       
  
  
  
  
4,033
   
3,664
   
Ending balance
   
3,664
   
3,826
   
3,924
   
3,992
   
4,033
  
       
  
  
  
  
         
Separate Account Liabilities:
                         
13,010
   
13,892
   
Beginning balance
   
13,391
   
12,021
   
13,010
   
13,129
   
12,117
1,294
   
1,355
   
Premiums and deposits
   
491
   
419
   
396
   
468
   
430
(2,371)
   
(1,946)
   
Change in market value and interest credited
   
(1,418)
   
1,031
   
111
   
(1,097)
   
(1,385)
(465)
   
(468)
   
Surrenders and withdrawals
   
(117)
   
(209)
   
(124)
   
(132)
   
(209)
(119)
   
(97)
   
Net transfers to general account
   
(96)
   
(10)
   
(38)
   
(37)
   
(44)
(621)
   
(641)
   
Policy charges
   
(210)
   
(223)
   
(211)
   
(207)
   
(203)
(26)
   
(74)
   
Benefits and other
   
(20)
   
(19)
   
(15)
   
(7)
   
(4)
  
       
  
  
  
  
10,702
   
12,021
   
Ending balance
   
12,021
   
13,010
   
13,129
   
12,117
   
10,702
  
       
  
  
  
  
         
INDIVIDUAL ANNUITIES:
                         
         
Account Values in General Account:
                         
6,152
   
5,677
   
Beginning balance
   
5,587
   
5,566
   
6,152
   
5,825
   
6,093
1,561
   
1,030
   
Premiums and deposits
   
306
   
361
   
411
   
587
   
563
220
   
233
   
Interest credited
   
76
   
77
   
72
   
71
   
77
(1,907)
   
(1,980)
   
Surrenders and withdrawals
   
(600)
   
(592)
   
(647)
   
(672)
   
(588)
728
   
758
   
Net transfers (to) from separate account (1)
   
240
   
243
   
(7)
   
321
   
414
(5)
   
(3)
   
Policy charges
   
(1)
   
(2)
   
(1)
   
(2)
   
(2)
(216)
   
(149)
   
Benefits and other (2)
   
(42)
   
499
   
(155)
   
(37)
   
(24)
  
       
  
  
  
  
6,533
   
5,566
   
Ending balance
   
5,566
   
6,152
   
5,825
   
6,093
   
6,533
  
       
  
  
  
  
         
Account Values in Separate Account:
                         
15,512
   
18,308
   
Beginning balance
   
16,808
   
14,489
   
15,512
   
15,519
   
13,757
558
   
717
   
Premiums and deposits
   
206
   
188
   
183
   
215
   
160
(2,954)
   
(2,894)
   
Change in market value and interest credited
   
(2,027)
   
1,316
   
51
   
(1,392)
   
(1,613)
(1,526)
   
(1,586)
   
Surrenders and withdrawals
   
(481)
   
(478)
   
(514)
   
(543)
   
(469)
240
   
111
   
Net transfers (to) from general account (1)
   
35
   
47
   
338
   
7
   
(105)
(142)
   
(167)
   
Policy charges
   
(52)
   
(50)
   
(51)
   
(49)
   
(42)
—  
   
—  
   
Benefits and other
   
—  
   
—  
   
—  
   
—  
   
—  
  
       
  
  
  
  
11,688
   
14,489
   
Ending balance
   
14,489
   
15,512
   
15,519
   
13,757
   
11,688
  
       
  
  
  
  
 
(1)
 
The quarter ended March 31, 2002 includes $314 million of policyholder credits, issued in connection with the Company's demutualization, applied to customer account balances held in the separate account.
(2)
 
The quarter ended March 31, 2002 includes a decrease in policyholder account balances of $101 million due to the distribution of policy credits, subsequently paid out in cash, as demutualization consideration in connection with the Company's demutualization. The quarter ended December 31, 2001 includes an increase in policyholder account values of $586 million as a result of policyholder credits issued in connection with the Company's demutualization, as well as a decrease in policyholder account values of $50 million transferred to the Closed Block Business upon its establishment.
 
 
 

Page 15

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

 
INSURANCE DIVISION—DEFERRED POLICY ACQUISITION COSTS
 
(in millions)
 
Year-to-date
      
2001
  
2002
2002
  
2001
      
3Q
  
4Q
  
1Q
  
2Q
  
3Q
       
INDIVIDUAL LIFE INSURANCE:
                    
3,133
  
3,090
  
Beginning balance
  
3,117
  
3,115
  
3,133
  
3,160
  
3,155
222
  
227
  
Capitalization
  
74
  
74
  
66
  
80
  
76
(208)
  
(177)
  
Amortization—operating results
  
(60)
  
(55)
  
(53)
  
(63)
  
(92)
—  
  
—  
  
Amortization—realized investment gains and losses
  
—  
  
—  
  
—  
  
—  
  
—  
(36)
  
(25)
  
Impact of unrealized (gains) or losses on AFS securities
  
(16)
  
(1)
  
14
  
(22)
  
(28)
 
     
 
 
 
 
3,111
  
3,115
  
Ending balance
  
3,115
  
3,133
  
3,160
  
3,155
  
3,111
 
     
 
 
 
 
       
INDIVIDUAL ANNUITIES:
                    
628
  
682
  
Beginning balance
  
655
  
612
  
628
  
654
  
598
97
  
74
  
Capitalization
  
24
  
25
  
28
  
35
  
34
(198)
  
(113)
  
Amortization—operating results
  
(51)
  
(21)
  
(23)
  
(70)
  
(105)
5
  
(1)
  
Amortization—realized investment gains and losses
  
2
  
15
  
1
  
1
  
3
(47)
  
(30)
  
Impact of unrealized (gains) or losses on AFS securities
  
(18)
  
(3)
  
20
  
(22)
  
(45)
 
     
 
 
 
 
485
  
612
  
Ending balance
  
612
  
628
  
654
  
598
  
485
 
     
 
 
 
 
       
GROUP INSURANCE (1):
                    
26
  
12
  
Beginning balance
  
18
  
22
  
26
  
31
  
39
17
  
11
  
Capitalization
  
4
  
7
  
2
  
8
  
7
2
  
(1)
  
Amortization—operating results
  
—  
  
(3)
  
3
  
—  
  
(1)
—  
  
—  
  
Amortization—realized investment gains and losses
  
—  
  
—  
  
—  
  
—  
  
—  
—  
  
—  
  
Impact of unrealized losses on AFS securities
  
—  
  
—  
  
—  
  
—  
  
—  
 
     
 
 
 
 
45
  
22
  
Ending balance
  
22
  
26
  
31
  
39
  
45
 
     
 
 
 
 
       
PROPERTY & CASUALTY INSURANCE:
                    
132
  
137
  
Beginning balance
  
141
  
137
  
132
  
130
  
131
288
  
297
  
Capitalization
  
95
  
93
  
98
  
95
  
95
(289)
  
(297)
  
Amortization—operating results
  
(99)
  
(98)
  
(100)
  
(94)
  
(95)
—  
  
—  
  
Amortization—realized investment gains and losses
  
—  
  
—  
  
—  
  
—  
  
—  
—  
  
—  
  
Impact of unrealized losses on AFS securities
  
—  
  
—  
  
—  
  
—  
  
—  
 
     
 
 
 
 
131
  
137
  
Ending balance
  
137
  
132
  
130
  
131
  
131
 
     
 
 
 
 
       
TOTAL INSURANCE DIVISION:
                    
3,919
  
3,921
  
Beginning balance
  
3,931
  
3,886
  
3,919
  
3,975
  
3,923
624
  
609
  
Capitalization
  
197
  
199
  
194
  
218
  
212
(693)
  
(588)
  
Amortization—operating results
  
(210)
  
(177)
  
(173)
  
(227)
  
(293)
5
  
(1)
  
Amortization—realized investment gains and losses
  
2
  
15
  
1
  
1
  
3
(83)
  
(55)
  
Impact of unrealized (gains) or losses on AFS securities
  
(34)
  
(4)
  
34
  
(44)
  
(73)
 
     
 
 
 
 
3,772
  
3,886
  
Ending balance
  
3,886
  
3,919
  
3,975
  
3,923
  
3,772
 
     
 
 
 
 
 
(1)
 
Represents long-term care products.

Page 16

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

 
INSURANCE DIVISION—SUPPLEMENTARY INFORMATION FOR INDIVIDUAL LIFE INSURANCE
 
(dollar amounts in millions)
 
Year-to-date
      
2001
  
2002
2002
  
2001
      
3Q
  
4Q
  
1Q
  
2Q
  
3Q
       
Individual Life Insurance:
                    
       
Policy Surrender Experience:
                    
495
  
461
  
Cash value of surrenders
  
132
  
176
  
162
  
148
  
185
4.1%
  
3.7%
  
Cash value of surrenders as a percentage of mean future policy benefits, policyholders' account balances, and separate account balances
  
3.2%
  
4.4%
  
3.9%
  
3.6%
  
4.7%
       
Death claims per $1,000 of in-force: (1)
                    
2.00
  
2.14
  
Variable and universal life
  
2.53
  
2.01
  
2.06
  
2.06
  
1.85
1.63
  
1.71
  
Term life
  
2.78
  
0.86
  
1.43
  
1.56
  
1.92
1.93
  
2.02
  
Total, Individual Life Insurance
  
2.61
  
1.65
  
1.87
  
1.94
  
1.96
 
(1)
 
Annualized, for interim reporting periods.

Page 17

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

 
INSURANCE DIVISION—SUPPLEMENTARY INFORMATION FOR GROUP INSURANCE
 
(dollar amounts in millions)
 
Year-to-date
      
2001
  
2002
2002
  
2001
      
3Q
  
4Q
  
1Q
  
2Q
  
3Q
       
GROUP INSURANCE NEW ANNUALIZED PREMIUMS:
                    
225
  
385
  
Group life
  
64
  
50
  
162
  
27
  
36
111
  
122
  
Group disability (1)
  
33
  
17
  
53
  
33
  
25
 
     
 
 
 
 
336
  
507
  
Total
  
97
  
67
  
215
  
60
  
61
 
     
 
 
 
 
       
Future Policy Benefits (2):
                    
       
Group life
  
1,623
  
1,664
  
1,617
  
1,609
  
1,580
       
Group disability (1)
  
98
  
103
  
137
  
138
  
148
           
 
 
 
 
       
Total
  
1,721
  
1,767
  
1,754
  
1,747
  
1,728
           
 
 
 
 
       
Policyholders' Account Balances (2):
                    
       
Group life
  
3,764
  
3,805
  
3,928
  
4,238
  
4,512
       
Group disability (1)
  
57
  
61
  
58
  
63
  
68
           
 
 
 
 
       
Total
  
3,821
  
3,866
  
3,986
  
4,301
  
4,580
           
 
 
 
 
       
Separate Account Liabilities (2):
                    
       
Group life
  
7,246
  
7,634
  
8,097
  
7,745
  
7,260
       
Group disability (1)
  
—  
  
—  
  
—  
  
—  
  
—  
           
 
 
 
 
       
Total
  
7,246
  
7,634
  
8,097
  
7,745
  
7,260
           
 
 
 
 
       
Group Life Insurance:
                    
1,985
  
1,798
  
Gross premiums, policy charges and fee income (3)
  
637
  
641
  
667
  
664
  
654
1,781
  
1,609
  
Earned premiums, policy charges and fee income
  
579
  
551
  
603
  
600
  
578
92.6%
  
93.9%
  
Benefits ratio
  
96.6%
  
88.6%
  
91.8%
  
92.8%
  
93.3%
10.0%
  
9.6%
  
Administrative operating expense ratio
  
8.8%
  
11.2%
  
10.0%
  
10.2%
  
9.6%
       
Persistency ratio
  
97.9%
  
97.4%
  
97.2%
  
96.1%
  
95.2%
       
Group Disability Insurance (1):
                    
452
  
401
  
Gross premiums, policy charges and fee income (3)
  
141
  
142
  
150
  
149
  
153
436
  
379
  
Earned premiums, policy charges and fee income
  
129
  
137
  
143
  
146
  
147
88.1%
  
95.3%
  
Benefits ratio
  
99.2%
  
94.9%
  
84.6%
  
87.7%
  
91.8%
22.4%
  
22.9%
  
Administrative operating expense ratio
  
22.0%
  
25.4%
  
22.7%
  
22.8%
  
21.6%
       
Persistency ratio
  
89.4%
  
88.8%
  
94.7%
  
93.0%
  
90.1%
 
(1)
 
Group disability amounts include long-term care products.
(2)
 
As of end of period.
(3)
 
Before returns of premiums to participating policyholders for favorable claims experience.

Page 18

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

 
INSURANCE DIVISION—SUPPLEMENTARY INFORMATION FOR PROPERTY AND CASUALTY INSURANCE
 
(dollar amounts in millions)
 
Year-to-date
      
2001
  
2002
2002
  
2001
      
3Q
  
4Q
  
1Q
  
2Q
  
3Q
       
Earned premium:
                    
1,156
  
1,030
  
Automobile
  
356
  
373
  
372
  
394
  
390
347
  
334
  
Homeowners'
  
113
  
114
  
113
  
116
  
118
25
  
25
  
Other
  
9
  
8
  
8
  
9
  
8
 
     
 
 
 
 
1,528
  
1,389
  
Total earned premium
  
478
  
495
  
493
  
519
  
516
 
     
 
 
 
 
       
Loss ratio (1) (2):
                    
76.5%
  
66.9%
  
Automobile
  
69.1%
  
81.0%
  
75.8%
  
75.1%
  
78.6%
81.8%
  
79.1%
  
Homeowners'
  
97.3%
  
69.0%
  
72.1%
  
87.8%
  
85.3%
78.0%
  
69.5%
  
Overall
  
75.6%
  
74.5%
  
74.8%
  
78.3%
  
80.6%
       
Expense ratio (1) (3):
                    
28.0%
  
31.2%
  
Automobile
  
30.3%
  
29.5%
  
28.5%
  
27.2%
  
28.3%
32.0%
  
36.8%
  
Homeowners'
  
34.3%
  
35.9%
  
35.3%
  
31.7%
  
30.0%
28.9%
  
32.5%
  
Overall
  
31.3%
  
31.0%
  
29.8%
  
28.2%
  
28.7%
       
Combined ratio (4):
                    
104.5%
  
98.1%
  
Automobile
  
99.4%
  
110.5%
  
104.3%
  
102.3%
  
106.9%
113.8%
  
115.9%
  
Homeowners'
  
131.6%
  
104.9%
  
107.4%
  
119.5%
  
115.3%
106.9%
  
102.0%
  
Overall
  
106.9%
  
105.5%
  
104.6%
  
106.5%
  
109.3%
20.7
  
37.8
  
Current accident year catastrophe losses (5)
  
12.8
  
4.2
  
4.2
  
8.0
  
8.5
1.4%
  
2.7%
  
Effect of current accident year catastrophic losses on combined ratio
  
2.7%
  
0.9%
  
0.9%
  
1.5%
  
1.7%
       
Accident year combined ratio (6)
  
106.9%
  
107.0%
  
105.0%
  
107.1%
  
106.9%
 
(1)
 
Based on statutory data.
(2)
 
Represents ratio of incurred losses and loss adjustment expenses to net earned premium.
(3)
 
Represents ratio of operating expenses to net written premium.
(4)
 
Represents the sum of loss ratio and expense ratio above.
(5)
 
Represents losses and loss adjustment expenses attributable to catastrophes that are included in the combined ratio. We classify catastrophes as those events that are declared catastrophes by Property Claims Services, which is an industry organization that declares and tracks all property-related catastrophes causing insured property damage in the United States.
(6)
 
Accident year combined ratios for annual periods reflect the combined ratios for accidents that occur in the indicated calendar year, restated to reflect subsequent changes in loss estimates for those claims based on cumulative loss data through the most recent balance sheet date. Accident year combined ratios for interim periods reflect the combined ratios for policies written in those periods, based on cumulative loss data through the respective balance sheet date of the indicated year. These ratios reflect any recoveries from stop-loss reinsurance contracts during the indicated periods.
 

Page 19

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

 
COMBINED STATEMENTS OF OPERATIONS—INVESTMENT DIVISION
 
(in millions)
 
Year-to-date
  
%
Change
      
2001
  
2002
2002
  
2001
        
3Q
  
4Q
  
1Q
  
2Q
  
3Q
           
Revenues (1):
                    
39
  
13
  
200%
  
Premiums
  
(8)
  
7
  
8
  
21
  
10
53
  
57
  
-7%
  
Policy charges and fee income
  
18
  
23
  
19
  
19
  
15
1,735
  
1,890
  
-8%
  
Net investment income
  
611
  
594
  
563
  
602
  
570
2,734
  
2,937
  
-7%
  
Commissions, investment management fees, and other income
  
927
  
957
  
937
  
931
  
866
 
         
 
 
 
 
4,561
  
4,897
  
-7%
  
Total revenues
  
1,548
  
1,581
  
1,527
  
1,573
  
1,461
 
         
 
 
 
 
           
Benefits and Expenses (1):
                    
648
  
693
  
-6%
  
Insurance and annuity benefits
  
231
  
220
  
197
  
231
  
220
728
  
727
  
0%
  
Interest credited to policyholders' account balances
  
250
  
250
  
243
  
238
  
247
12
  
25
  
-52%
  
Interest expense
  
8
  
7
  
3
  
5
  
4
(36)
  
(48)
  
25%
  
Deferral of acquisition costs
  
(12)
  
(12)
  
(14)
  
(14)
  
(8)
69
  
66
  
5%
  
Amortization of acquisition costs
  
22
  
20
  
21
  
27
  
21
1,802
  
2,068
  
-13%
  
Securities operations non-interest expenses
  
653
  
661
  
607
  
619
  
576
1,098
  
1,208
  
-9%
  
General and administrative expenses
  
397
  
429
  
370
  
377
  
351
 
         
 
 
 
 
4,321
  
4,739
  
-9%
  
Total benefits and expenses
  
1,549
  
1,575
  
1,427
  
1,483
  
1,411
 
         
 
 
 
 
240
  
158
  
52%
  
Adjusted operating income before income taxes
  
(1)
  
6
  
100
  
90
  
50
 
         
 
 
 
 
 
(1)
 
Revenues exclude realized investment gains, net of losses. Benefits and expenses exclude charges related to realized investment gains, net of losses.

Page 20

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

 
COMBINING STATEMENTS OF OPERATIONS—INVESTMENT DIVISION
 
(in millions)
 
      
Quarter Ended September 30, 2002
      
Total Investment Division
       
Investment Management
     
Financial Advisory
       
Retirement
       
Other Asset Management
Revenues (1):
                                         
Premiums
     
10
 
     
—  
 
   
—  
 
     
10
 
     
—  
Policy charges and fee income
     
15
 
     
—  
 
   
—  
 
     
15
 
     
—  
Net investment income
     
570
 
     
7
 
   
38
 
     
515
 
     
10
Commissions, investment management fees, and other income
     
866
 
     
286
 
   
531
 
     
35
 
     
14
      
    
  
    
    
Total revenues
     
1,461
 
     
293
 
   
569
 
     
575
 
     
24
      
    
  
    
    
Benefits and Expenses (1):
                                         
Insurance and annuity benefits
     
220
 
     
—  
 
   
—  
 
     
220
 
     
—  
Interest credited to policyholders' account balances
     
247
 
     
—  
 
   
—  
 
     
247
 
     
—  
Interest expense
     
4
 
     
1
 
   
—  
 
     
—  
 
     
3
Deferral of acquisition costs
     
(8
)
     
(5
)
   
—  
 
     
(3
)
     
—  
Amortization of acquisition costs
     
21
 
     
19
 
   
—  
 
     
2
 
     
—  
Securities operations non-interest expenses
     
576
 
     
—  
 
   
576
 
     
—  
 
     
—  
General and administrative expenses
     
351
 
     
249
 
   
9
 
     
85
 
     
8
      
    
  
    
    
Total benefits and expenses
     
1,411
 
     
264
 
   
585
 
     
551
 
     
11
      
    
  
    
    
Adjusted operating income before income taxes
     
50
 
     
29
 
   
(16
)
     
24
 
     
13
      
    
  
    
    
      
Quarter Ended September 30, 2001
      
Total Investment Division
       
Investment Management
     
Financial Advisory
       
Retirement
       
Other Asset Management
Revenues (1):
                                         
Premiums
     
(8
)
     
—  
 
   
—  
 
     
(8
)
     
—  
Policy charges and fee income
     
18
 
     
—  
 
   
—  
 
     
18
 
     
—  
Net investment income
     
611
 
     
7
 
   
63
 
     
529
 
     
12
Commissions, investment management fees, and other income
     
927
 
     
332
 
   
550
 
     
36
 
     
9
      
    
  
    
    
Total revenues
     
1,548
 
     
339
 
   
613
 
     
575
 
     
21
      
    
  
    
    
Benefits and Expenses (1):
                                         
Insurance and annuity benefits
     
231
 
     
—  
 
   
—  
 
     
231
 
     
—  
Interest credited to policyholders' account balances
     
250
 
     
—  
 
   
—  
 
     
250
 
     
—  
Interest expense
     
8
 
     
3
 
   
—  
 
     
3
 
     
2
Deferral of acquisition costs
     
(12
)
     
(9
)
   
—  
 
     
(3
)
     
—  
Amortization of acquisition costs
     
22
 
     
20
 
   
—  
 
     
2
 
     
—  
Securities operations non-interest expenses
     
653
 
     
—  
 
   
653
 
     
— 
 
     
—  
General and administrative expenses
     
397
 
     
284
 
   
8
 
     
96
 
     
9
      
    
  
    
    
Total benefits and expenses
     
1,549
 
     
298
 
   
661
 
     
579
 
     
11
      
    
  
    
    
Adjusted operating income before income taxes
     
(1
)
     
41
 
   
(48
)
     
(4
)
     
10
      
    
  
    
    
 
(1)
 
Revenues exclude realized investment gains, net of losses. Benefits and expenses exclude charges related to realized investment gains, net of losses.

Page 21

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

COMBINING STATEMENTS OF OPERATIONS—INVESTMENT DIVISION
 
(in millions)
 
      
Nine Months Ended September 30, 2002
      
Total Investment Division
       
Investment Management
     
Financial Advisory
       
Retirement
       
Other
Asset Management
Revenues (1):
                                         
Premiums
     
39
 
     
—  
 
   
—  
 
     
39
 
     
—  
Policy charges and fee income
     
53
 
     
—  
 
   
—  
 
     
53
 
     
—  
Net investment income
     
1,735
 
     
20
 
   
131
 
     
1,559
 
     
25
Commissions, investment management fees, and other income
     
2,734
 
     
906
 
   
1,674
 
     
105
 
     
49
      
    
  
    
    
Total revenues
     
4,561
 
     
926
 
   
1,805
 
     
1,756
 
     
74
      
    
  
    
    
Benefits and Expenses (1):
                                         
Insurance and annuity benefits
     
648
 
     
—  
 
   
—  
 
     
648
 
     
—  
Interest credited to policyholders’ account balances
     
728
 
     
—  
 
   
—  
 
     
728
 
     
—  
Interest expense
     
12
 
     
4
 
   
—  
 
     
3
 
     
5
Deferral of acquisition costs
     
(36
)
     
(27
)
   
—  
 
     
(9
)
     
—  
Amortization of acquisition costs
     
69
 
     
56
 
   
—  
 
     
13
 
     
—  
Securities operations non-interest expenses
     
1,802
 
     
—  
 
   
1,802
 
     
—  
 
     
—  
General and administrative expenses
     
1,098
 
     
781
 
   
24
 
     
265
 
     
28
      
    
  
    
    
Total benefits and expenses
     
4,321
 
     
814
 
   
1,826
 
     
1,648
 
     
33
      
    
  
    
    
Adjusted operating income before income taxes
     
240
 
     
112
 
   
(21
)
     
108
 
     
41
      
    
  
    
    
      
Nine Months Ended September 30, 2001
      
Total Investment Division
       
Investment Management
     
Financial Advisory
       
Retirement
       
Other
Asset Management
Revenues (1):
                                         
Premiums
     
13
 
     
—  
 
   
—  
 
     
13
 
     
—  
Policy charges and fee income
     
57
 
     
—  
 
   
—  
 
     
57
 
     
—  
Net investment income
     
1,890
 
     
26
 
   
193
 
     
1,636
 
     
35
Commissions, investment management fees, and other income
     
2,937
 
     
996
 
   
1,796
 
     
113
 
     
32
      
    
  
    
    
Total revenues
     
4,897
 
     
1,022
 
   
1,989
 
     
1,819
 
     
67
      
    
  
    
    
Benefits and Expenses (1):
                                         
Insurance and annuity benefits
     
693
 
     
—  
 
   
—  
 
     
693
 
     
—  
Interest credited to policyholders’ account balances
     
727
 
     
—  
 
   
—  
 
     
727
 
     
—  
Interest expense
     
25
 
     
10
 
   
—  
 
     
10
 
     
5
Deferral of acquisition costs
     
(48
)
     
(39
)
   
—  
 
     
(9
)
     
—  
Amortization of acquisition costs
     
66
 
     
58
 
   
—  
 
     
8
 
     
—  
Securities operations non-interest expenses
     
2,068
 
     
—  
 
   
2,068
 
     
—  
 
     
—  
General and administrative expenses
     
1,208
 
     
871
 
   
26
 
     
285
 
     
26
      
    
  
    
    
Total benefits and expenses
     
4,739
 
     
900
 
   
2,094
 
     
1,714
 
     
31
      
    
  
    
    
Adjusted operating income before income taxes
     
158
 
     
122
 
   
(105
)
     
105
 
     
36
      
    
  
    
    
 
(1)
 
Revenues exclude realized investment gains, net of losses. Benefits and expenses exclude charges related to realized investment gains, net of losses.

Page 22

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

INVESTMENT DIVISION—SUPPLEMENTARY REVENUE INFORMATION FOR INVESTMENT MANAGEMENT AND FINANCIAL ADVISORY SEGMENTS
 
(dollar amounts in millions unless otherwise noted)
 
Year-to-date
  
%
      
2001
  
2002
2002
  
2001
  
Change
      
3Q
  
4Q
  
1Q
  
2Q
  
3Q
           
Investment Management Segment:
                    
           
Analysis of revenues by source:
                    
           
Investment Management and Advisory Services:
                    
140
  
159
  
-12%
  
Retail customers
  
52
  
51
  
49
  
48
  
43
250
  
287
  
-13%
  
Institutional customers
  
91
  
96
  
84
  
87
  
79
162
  
165
  
-2%
  
General account
  
59
  
62
  
54
  
57
  
51
 
         
 
 
 
 
552
  
611
  
-10%
  
Subtotal
  
202
  
209
  
187
  
192
  
173
374
  
411
  
-9%
  
Mutual Fund revenues (1)
  
137
  
126
  
130
  
124
  
120
 
         
 
 
 
 
926
  
1,022
  
-9%
  
Total Investment Management segment revenues
  
339
  
335
  
317
  
316
  
293
 
         
 
 
 
 
           
Analysis of commissions, investment management fees and other revenues by type:
                    
           
Investment Management and Advisory Services:
                    
514
  
557
  
-8%
  
Asset-based fees
  
186
  
184
  
176
  
178
  
160
20
  
31
  
-35%
  
Transaction-based and other revenues
  
10
  
9
  
5
  
8
  
7
 
         
 
 
 
 
534
  
588
  
-9%
  
Subtotal
  
196
  
193
  
181
  
186
  
167
372
  
408
  
-9%
  
Mutual Fund revenues (1)
  
136
  
126
  
130
  
123
  
119
 
         
 
 
 
 
906
  
996
  
-9%
  
Total
  
332
  
319
  
311
  
309
  
286
 
         
 
 
 
 
           
Financial Advisory Segment:
                    
           
Non-Interest Revenues:
                    
991
  
1,059
  
-6%
  
Commissions
  
311
  
361
  
334
  
342
  
315
571
  
573
  
0%
  
Fees
  
193
  
171
  
193
  
194
  
184
112
  
164
  
-32%
  
Other non-interest revenues
  
46
  
45
  
44
  
36
  
32
 
         
 
 
 
 
1,674
  
1,796
  
-7%
  
Total non-interest revenues
  
550
  
577
  
571
  
572
  
531
 
         
 
 
 
 
           
Recurring revenue as a percentage of total non-interest revenue (2)
  
37.4%
  
36.7%
  
37.4%
  
38.5%
  
38.6%
3.00
  
4.59
      
Average customer margin lending balances ($ in billions)
  
4.20
  
3.47
  
3.26
  
3.10
  
2.60
 
(1)
 
Represents mutual fund revenues other than asset management fees paid to affiliates, which are included in appropriate categories above.
(2)
 
Calculated on a trailing 12 month basis excluding Consumer Banking and Equity Securities sales and trading revenue.

Page 23

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

 
INVESTMENT DIVISION—ASSETS UNDER MANAGEMENT FOR INVESTMENT MANAGEMENT AND ADVISORY SERVICES OPERATIONS
 
(in billions)
 
    
September 30, 2002
    
Equity
   
Fixed Income
   
Real Estate
   
Total
Retail customers (1)
   
30.6
   
46.6
   
0.1
   
77.3
Institutional customers (1)
   
23.6
   
46.1
   
10.1
   
79.8
General account (1)
   
2.2
   
116.0
   
1.3
   
119.5
    
  
  
  
Total
   
56.4
   
208.7
   
11.5
   
276.6
    
  
  
  
    
September 30, 2001
    
Equity
   
Fixed Income
   
Real Estate
   
Total
Retail customers
   
39.7
   
53.1
   
—  
   
92.8
Institutional customers
   
35.2
   
39.6
   
10.1
   
84.9
General account
   
2.2
   
106.4
   
1.5
   
110.1
    
  
  
  
Total
   
77.1
   
199.1
   
11.6
   
287.8
    
  
  
  
 
Year-to-date
      
2001
  
2002
2002
  
2001
      
3Q
  
4Q
  
1Q
  
2Q
  
3Q
       
Institutional Assets Under Management: (1)
                    
       
Assets gathered by Investment Management & Advisory Services sales force: (2)
                    
67.9
  
74.5
  
Beginning assets under management
  
70.4
  
65.3
  
67.9
  
62.6
  
60.2
8.8
  
9.5
  
Additions to managed portfolio
  
2.4
  
4.2
  
3.0
  
2.9
  
2.9
(14.0)
  
(12.2)
  
Withdrawals
  
(4.2)
  
(5.6)
  
(8.4)
  
(2.5)
  
(3.1)
(4.3)
  
(6.5)
  
Change in market value
  
(3.3)
  
3.9
  
0.1
  
(2.4)
  
(2.0)
2.5
  
—  
  
Net money market flows
  
—  
  
0.1
  
4.0
  
(0.4)
  
(1.1)
(4.0)
  
—  
  
Other (2)
  
—  
  
—  
  
(4.0)
  
—  
  
—  
 
     
 
 
 
 
56.9
  
65.3
  
Ending assets under management
  
65.3
  
67.9
  
62.6
  
60.2
  
56.9
22.9
  
19.6
  
Other institutional assets under management (2)
  
19.6
  
21.2
  
23.6
  
23.3
  
22.9
 
     
 
 
 
 
79.8
  
84.9
  
Total assets managed for institutional customers at end of period
  
84.9
  
89.1
  
86.2
  
83.5
  
79.8
 
     
 
 
 
 
 
(1)
 
Reflects reclassification of amounts by client category as of January 1, 2002, based on internal management criteria, which reduced the amount attributed to retail customers by $3.3 billion and increased the amounts attributed to institutional customers and the general account by $2.8 billion and $0.5 billion, respectively.
(2)
 
Reflects reclassification of amounts by asset gatherer category as of January 1, 2002, based on internal management criteria, which reduced the amount attributed to assets gathered by Investment Management & Advisory Services sales force and increased the amount attributed to other institutional assets under management by $4.0 billion.

Page 24

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

 
INVESTMENT DIVISION—MUTUAL FUNDS AND WRAP-FEE PRODUCTS SALES RESULTS AND ASSETS UNDER MANAGEMENT
 
(in millions)
 
Year-to-date
      
2001
  
2002
2002
  
2001
      
3Q
  
4Q
  
1Q
  
2Q
  
3Q
       
MUTUAL FUNDS AND WRAP-FEE PRODUCTS SALES AND ASSETS UNDER MANAGEMENT
                    
       
Mutual Funds:
                    
57,809
  
57,764
  
Beginning total mutual funds assets
  
59,618
  
56,951
  
57,809
  
56,743
  
52,459
3,520
  
4,337
  
Sales (other than money market)
  
907
  
936
  
914
  
1,460
  
1,146
(3,714)
  
(3,415)
  
Redemptions (other than money market)
  
(1,110)
  
(1,282)
  
(1,116)
  
(1,339)
  
(1,259)
(5,038)
  
(4,038)
  
Reinvestment of distributions and change in market value
  
(3,840)
  
2,144
  
32
  
(2,450)
  
(2,620)
(3,938)
  
2,303
  
Net money market sales
  
1,376
  
(940)
  
(896)
  
(1,955)
  
(1,087)
 
     
 
 
 
 
48,639
  
56,951
  
Ending total mutual funds assets
  
56,951
  
57,809
  
56,743
  
52,459
  
48,639
 
     
 
 
 
 
(194)
  
922
  
Net Mutual Funds sales (redemptions) other than money market
  
(203)
  
(346)
  
(202)
  
121
  
(113)
 
     
 
 
 
 
       
Wrap-fee Products: (1)
                    
17,955
  
19,621
  
Beginning total wrap-fee product assets
  
18,714
  
16,141
  
17,955
  
18,192
  
16,676
4,766
  
5,889
  
Sales
  
1,626
  
1,563
  
1,667
  
1,876
  
1,223
(4,419)
  
(4,718)
  
Redemptions
  
(1,462)
  
(1,342)
  
(1,361)
  
(1,618)
  
(1,440)
(3,919)
  
(4,651)
  
Reinvestment of distributions and change in market value
  
(2,737)
  
1,593
  
(69)
  
(1,774)
  
(2,076)
 
     
 
 
 
 
14,383
  
16,141
  
Ending total wrap-fee product assets
  
16,141
  
17,955
  
18,192
  
16,676
  
14,383
15,424
  
15,366
  
Other managed accounts at end of period (2)
  
15,366
  
17,575
  
18,006
  
16,827
  
15,424
 
     
 
 
 
 
29,807
  
31,507
  
Total wrap-fee products and other managed accounts at end of period
  
31,507
  
35,530
  
36,198
  
33,503
  
29,807
 
     
 
 
 
 
347
  
1,171
  
Net wrap-fee product sales (1)
  
164
  
221
  
306
  
258
  
(217)
 
     
 
 
 
 
       
MUTUAL FUNDS AND WRAP-FEE PRODUCTS GROSS SALES BY DISTRIBUTION CHANNEL
                    
       
Mutual funds, excluding wrap-fee products (3):
                    
421
  
593
  
Prudential Agents
  
161
  
150
  
156
  
158
  
107
914
  
1,302
  
Financial Advisors
  
298
  
300
  
339
  
407
  
168
2,143
  
2,372
  
Third-party distributors
  
457
  
479
  
387
  
890
  
866
42
  
70
  
Other
  
(9)
  
7
  
32
  
5
  
5
 
     
 
 
 
 
3,520
  
4,337
  
Total
  
907
  
936
  
914
  
1,460
  
1,146
 
     
 
 
 
 
       
Wrap-fee products: (1)
                    
351
  
323
  
Prudential Agents
  
104
  
101
  
115
  
132
  
104
4,113
  
5,433
  
Financial Advisors
  
1,488
  
1,404
  
1,483
  
1,615
  
1,015
302
  
133
  
Third-party distributors
  
34
  
58
  
69
  
129
  
104
 
     
 
 
 
 
4,766
  
5,889
  
Total
  
1,626
  
1,563
  
1,667
  
1,876
  
1,223
 
     
 
 
 
 
 
(1)
 
Excludes other managed accounts.
(2)
 
Includes amounts under both management and administration for certain Prudential Securities programs and unit investment trusts.
(3)
 
Other than money market.

Page 25

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

INVESTMENT DIVISION—RETIREMENT SALES RESULTS AND ACCOUNT VALUES
 
(in millions)
 
Year-to-date
      
2001
  
2002
2002
  
2001
      
3Q
  
4Q
  
1Q
  
2Q
  
3Q
       
RETIREMENT SALES AND ACCOUNT VALUES
                    
       
Defined Contribution:
                    
24,640
  
26,046
  
Beginning total account value
  
25,319
  
22,710
  
24,640
  
25,337
  
24,036
2,773
  
2,907
  
Sales
  
729
  
782
  
1,010
  
904
  
859
(2,342)
  
(2,784)
  
Withdrawals
  
(728)
  
(638)
  
(817)
  
(755)
  
(770)
(3,160)
  
(3,459)
  
Change in market value and interest credited (1)
  
(2,610)
  
1,786
  
504
  
(1,450)
  
(2,214)
 
     
 
 
 
 
21,911
  
22,710
  
Ending total account value
  
22,710
  
24,640
  
25,337
  
24,036
  
21,911
 
     
 
 
 
 
431
  
123
  
Net sales
  
1
  
144
  
193
  
149
  
89
 
     
 
 
 
 
       
Asset management of ending total account value:
                    
       
Proprietary
  
16,501
  
17,665
  
18,107
  
17,075
  
15,752
       
Non-proprietary
  
6,209
  
6,975
  
7,230
  
6,961
  
6,159
           
 
 
 
 
       
Total
  
22,710
  
24,640
  
25,337
  
24,036
  
21,911
           
 
 
 
 
       
Guaranteed Products:
                    
39,825
  
41,577
  
Beginning total account value
  
39,920
  
39,008
  
39,825
  
39,400
  
39,172
1,056
  
1,866
  
Sales
  
285
  
433
  
259
  
506
  
291
(2,632)
  
(3,569)
  
Withdrawals and benefits
  
(1,123)
  
(803)
  
(864)
  
(993)
  
(775)
1,303
  
1,360
  
Change in market value and interest income
  
388
  
838
  
355
  
395
  
553
(905)
  
(2,226)
  
Other (2)
  
(462)
  
349
  
(175)
  
(136)
  
(594)
 
     
 
 
 
 
38,647
  
39,008
  
Ending total account value
  
39,008
  
39,825
  
39,400
  
39,172
  
38,647
 
     
 
 
 
 
(1,576)
  
(1,703)
  
Net withdrawals
  
(838)
  
(370)
  
(605)
  
(487)
  
(484)
 
     
 
 
 
 
       
Product composition of ending total account value:
                    
       
Spread-lending products
  
18,841
  
18,887
  
18,915
  
18,869
  
18,702
       
Fee-based products
  
20,167
  
20,938
  
20,485
  
20,303
  
19,945
           
 
 
 
 
       
Total
  
39,008
  
39,825
  
39,400
  
39,172
  
38,647
           
 
 
 
 
 
(1)
 
Includes increases to account values of $352 million in the nine months ended September 30, 2002, $4 million in the quarter ended September 30, 2002, $247 million in the quarter ended June 30, 2002 and $101 million in the quarter ended March 31, 2002, added to customer accounts due to common stock received as demutualization consideration. The quarter ended March 31, 2002 also includes $448 million added to customer accounts from the inclusion of amounts now reflected in this segment. The quarter ended December 31, 2001 includes an increase in account values of $433 million as a result of policyholder credits issued in connection with the Company's demutualization.
(2)
 
Represents changes in asset balances for externally managed accounts. In addition, the quarter ended December 31, 2001 includes an increase in account values of $181 million representing cumulative conversions of client account balances to products currently included in this division as well as $2 million of policyholder credits issued in connection with the Company's demutualization.

Page 26

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

 
COMBINED STATEMENTS OF OPERATIONS—INTERNATIONAL INSURANCE AND INVESTMENTS DIVISION
 
(in millions)
 
Year-to-date
    
%
Change
 
       
2001
     
2002
  
2002
     
2001
           
3Q
     
4Q
     
1Q
     
2Q
     
3Q
  
                
Revenues (1):
                                   
3,083
 
   
2,291
 
  
35%
  
Premiums
   
1,020
 
   
1,046
 
   
1,016
 
   
1,006
 
   
1,061
 
152
 
   
237
 
  
-36%
  
Policy charges and fee income
   
102
 
   
70
 
   
57
 
   
49
 
   
46
 
548
 
   
349
 
  
57%
  
Net investment income
   
170
 
   
162
 
   
164
 
   
185
 
   
199
 
402
 
   
396
 
  
2%
  
Commissions, investment management fees, and other income
   
118
 
   
143
 
   
149
 
   
142
 
   
111
 
  
          
  
  
  
  
4,185
 
   
3,273
 
  
28%
  
Total revenues
   
1,410
 
   
1,421
 
   
1,386
 
   
1,382
 
   
1,417
 
  
          
  
  
  
  
                
Benefits and Expenses (1):
                                   
2,412
 
   
1,833
 
  
32%
  
Insurance and annuity benefits
   
794
 
   
841
 
   
783
 
   
799
 
   
830
 
72
 
   
47
 
  
53%
  
Interest credited to policyholders' account balances
   
28
 
   
25
 
   
24
 
   
24
 
   
24
 
—  
 
   
6
 
  
-100%
  
Interest expense
   
2
 
   
(2
)
   
—  
 
   
—  
 
   
—  
 
(460
)
   
(390
)
  
-18%
  
Deferral of acquisition costs
   
(133
)
   
(149
)
   
(151
)
   
(147
)
   
(162
)
174
 
   
117
 
  
49%
  
Amortization of acquisition costs
   
44
 
   
47
 
   
65
 
   
44
 
   
65
 
340
 
   
383
 
  
-11%
  
Securities operations non-interest expenses
   
125
 
   
147
 
   
114
 
   
119
 
   
107
 
1,091
 
   
879
 
  
24%
  
General and administrative expenses
   
370
 
   
387
 
   
351
 
   
367
 
   
373
 
  
          
  
  
  
  
3,629
 
   
2,875
 
  
26%
  
Total benefits and expenses
   
1,230
 
   
1,296
 
   
1,186
 
   
1,206
 
   
1,237
 
  
          
  
  
  
  
556
 
   
398
 
  
40%
  
Adjusted operating income before income taxes
   
180
 
   
125
 
   
200
 
   
176
 
   
180
 
  
          
  
  
  
  
 
(1)
 
Revenues exclude realized investment gains, net of losses. Benefits and expenses exclude charges related to realized investment gains, net of losses.

Page 27

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

 
COMBINING STATEMENTS OF OPERATIONS—INTERNATIONAL INSURANCE AND INVESTMENTS DIVISION
 
(in millions)
 
      
Nine Months Ended September 30, 2002
       
Quarter Ended September 30, 2002
  
      
Total International Insurance & Investments Division
       
International Insurance excl.Gibraltar Life
       
International Insurance—
Gibraltar Life (2)
       
International Securities and Investments
       
Total International Insurance & Investments Division
       
International Insurance excl.Gibraltar Life
       
International Insurance—
Gibraltar Life (2)
       
International Securities and Investments
  
Revenues (1):
                                                                        
Premiums
     
3,083
 
     
1,532
 
     
1,551
 
     
—  
 
     
1,061
 
     
551
 
     
510
 
     
—  
 
Policy charges and fee income
     
152
 
     
78
 
     
74
 
     
—  
 
     
46
 
     
28
 
     
18
 
     
—  
 
Net investment income
     
548
 
     
134
 
     
373
 
     
41
 
     
199
 
     
48
 
     
138
 
     
13
 
Commissions, investment management fees, and other income
     
402
 
     
9
 
     
33
 
     
360
 
     
111
 
     
(5
)
     
(1
)
     
117
 
      
    
    
    
    
    
    
    
Total revenues
     
4,185
 
     
1,753
 
     
2,031
 
     
401
 
     
1,417
 
     
622
 
     
665
 
     
130
 
      
    
    
    
    
    
    
    
Benefits and Expenses (1):
                                                                        
Insurance and annuity benefits
     
2,412
 
     
1,138
 
     
1,274
 
     
—  
 
     
830
 
     
408
 
     
422
 
     
—  
 
Interest credited to policyholders' account balances
     
72
 
     
5
 
     
67
 
     
—  
 
     
24
 
     
2
 
     
22
 
     
—  
 
Interest expense
     
—  
 
     
3
 
     
(3
)
     
—  
 
     
—  
 
     
1
 
     
(1
)
     
—  
 
Deferral of acquisition costs
     
(460
)
     
(339
)
     
(121
)
     
—  
 
     
(162
)
     
(115
)
     
(47
)
     
—  
 
Amortization of acquisition costs
     
174
 
     
158
 
     
15
 
     
1
 
     
65
 
     
58
 
     
6
 
     
1
 
Securities operations non-interest expenses
     
340
 
     
—  
 
     
—  
 
     
340
 
     
107
 
     
—  
 
     
—  
 
     
107
 
General and administrative expenses
     
1,091
 
     
518
 
     
492
 
     
81
 
     
373
 
     
184
 
     
161
 
     
28
 
      
    
    
    
    
    
    
    
Total benefits and expenses
     
3,629
 
     
1,483
 
     
1,724
 
     
422
 
     
1,237
 
     
538
 
     
563
 
     
136
 
      
    
    
    
    
    
    
    
Adjusted operating income before income taxes
     
556
 
     
270
 
     
307
 
     
(21
)
     
180
 
     
84
 
     
102
 
     
(6
)
      
    
    
    
    
    
    
    
      
Nine Months Ended September 30, 2001
       
Quarter Ended September 30, 2001
  
      
Total International Insurance & Investments Division
       
International Insurance excl.Gibraltar Life
       
International Insurance—
Gibraltar Life (2)
       
International Securities and Investments
       
Total International Insurance & Investments Division
       
International Insurance excl.Gibraltar Life
       
International Insurance—
Gibraltar Life (2)
       
International Securities and Investments
  
Revenues (1):
                                                                        
Premiums
     
2,291
 
     
1,351
 
     
940
 
     
—  
 
     
1,020
 
     
458
 
     
562
 
     
—  
 
Policy charges and fee income
     
237
 
     
71
 
     
166
 
     
—  
 
     
102
 
     
25
 
     
77
 
     
—  
 
Net investment income
     
349
 
     
105
 
     
197
 
     
47
 
     
170
 
     
37
 
     
117
 
     
16
 
Commissions, investment management fees, and other income
     
396
 
     
28
 
     
2
 
     
366
 
     
118
 
     
8
 
     
1
 
     
109
 
      
    
    
    
    
    
    
    
Total revenues
     
3,273
 
     
1,555
 
     
1,305
 
     
413
 
     
1,410
 
     
528
 
     
757
 
     
125
 
      
    
    
    
    
    
    
    
Benefits and Expenses (1):
                                                                        
Insurance and annuity benefits
     
1,833
 
     
1,019
 
     
814
 
     
—  
 
     
794
 
     
345
 
     
449
 
     
—  
 
Interest credited to policyholders' account balances
     
47
 
     
3
 
     
44
 
     
—  
 
     
28
 
     
1
 
     
27
 
     
—  
 
Interest expense
     
6
 
     
5
 
     
1
 
     
—  
 
     
2
 
     
1
 
     
1
 
     
—  
 
Deferral of acquisition costs
     
(390
)
     
(346
)
     
(44
)
     
—  
 
     
(133
)
     
(113
)
     
(20
)
     
—  
 
Amortization of acquisition costs
     
117
 
     
113
 
     
3
 
     
1
 
     
44
 
     
40
 
     
3
 
     
1
 
Securities operations non-interest expenses
     
383
 
     
—  
 
     
—  
 
     
383
 
     
125
 
     
—  
 
     
—  
 
     
125
 
General and administrative expenses
     
879
 
     
507
 
     
302
 
     
70
 
     
370
 
     
178
 
     
171
 
     
21
 
      
    
    
    
    
    
    
    
Total benefits and expenses
     
2,875
 
     
1,301
 
     
1,120
 
     
454
 
     
1,230
 
     
452
 
     
631
 
     
147
 
      
    
    
    
    
    
    
    
Adjusted operating income before income taxes
     
398
 
     
254
 
     
185
 
     
(41
)
     
180
 
     
76
 
     
126
 
     
(22
)
      
    
    
    
    
    
    
    
 
(1)
 
Revenues exclude realized investment gains, net of losses. Benefits and expenses exclude charges related to realized investment gains, net of losses.
(2)
 
Results of Gibraltar Life are included from April 2, 2001, the date of reorganization, through August 31, 2002.

Page 28

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

 
INTERNATIONAL INSURANCE AND INVESTMENTS DIVISION—SALES RESULTS AND SUPPLEMENTARY INFORMATION
(dollar amounts in millions unless otherwise noted)
 
Year-to-date
      
2001
  
2002
2002
   
2001
      
3Q
  
4Q
  
1Q
  
2Q
  
3Q
        
INTERNATIONAL INSURANCE OPERATING DATA:
                    
        
Actual exchange rate basis (1):
                    
        
Net premiums, policy charges and fee income:
                
1,193
   
1,131
  
Japan, excluding Gibraltar Life
  
376
  
395
  
395
  
374
  
424
1,625
   
1,106
  
Gibraltar Life (2)
  
639
  
604
  
558
  
539
  
528
417
   
291
  
All other countries
  
107
  
117
  
120
  
142
  
155
  
     
 
 
 
 
3,235
   
2,528
  
Total
  
1,122
  
1,116
  
1,073
  
1,055
  
1,107
  
     
 
 
 
 
        
Annualized new business premiums:
                    
223
   
283
  
Japan, excluding Gibraltar Life
  
77
  
87
  
77
  
67
  
79
170
   
54
  
Gibraltar Life (2)
  
44
  
56
  
49
  
59
  
62
148
   
159
  
All other countries
  
51
  
53
  
53
  
51
  
44
  
     
 
 
 
 
541
   
496
  
Total
  
172
  
196
  
179
  
177
  
185
  
     
 
 
 
 
        
Constant exchange rate basis (3):
                    
        
Net premiums, policy charges and fee income:
                
1,237
   
1,125
  
Japan, excluding Gibraltar Life
  
376
  
401
  
431
  
389
  
417
1,699
   
1,117
  
Gibraltar Life (2)
  
645
  
602
  
603
  
575
  
521
416
   
289
  
All other countries
  
106
  
119
  
124
  
143
  
149
  
     
 
 
 
 
3,352
   
2,531
  
Total
  
1,127
  
1,122
  
1,158
  
1,107
  
1,087
  
     
 
 
 
 
        
Annualized new business premiums:
                    
231
   
281
  
Japan, excluding Gibraltar Life
  
77
  
89
  
84
  
69
  
78
178
   
54
  
Gibraltar Life (2)
  
44
  
56
  
53
  
63
  
62
147
   
159
  
All other countries
  
51
  
53
  
55
  
49
  
43
  
     
 
 
 
 
 
556
   
494
  
Total
  
172
  
198
  
192
  
181
  
183
  
     
 
 
 
 
        
Face amount of individual policies in force at end of period (in billions):
                    
        
Japan, excluding Gibraltar Life
  
124
  
127
  
130
  
133
  
135
        
Gibraltar Life (2)
  
244
  
232
  
224
  
217
  
212
        
All other countries
  
34
  
38
  
41
  
42
  
45
            
 
 
 
 
        
Total
  
402
  
397
  
395
  
392
  
392
            
 
 
 
 
        
Number of individual policies in force at end of period (in thousands):
                    
        
Japan, excluding Gibraltar Life
  
918
  
946
  
973
  
990
  
1,011
        
Gibraltar Life (2)
  
5,047
  
4,911
  
4,787
  
4,666
  
4,602
        
All other countries
  
492
  
536
  
571
  
609
  
643
            
 
 
 
 
        
Total
  
6,457
  
6,393
  
6,331
  
6,265
  
6,256
            
 
 
 
 
 
(1)
 
Translated based on applicable average exchange rate for the period shown.
(2)
 
Results of Gibraltar Life are included from April 2, 2001, the date of reorganization, through August 31,2002.
(3)
 
Translated based on average exchange rates for the year ended December 31, 2001.

Page 29

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

 
INTERNATIONAL INSURANCE AND INVESTMENTS DIVISION—SALES RESULTS AND SUPPLEMENTARY INFORMATION
 
(dollar amounts in millions unless otherwise noted)
 
    
2001
     
2002
  
    
3Q
     
4Q
     
1Q
     
2Q
     
3Q
  
International insurance policy persistency (1):
                                   
13 months
   
93.1
%
   
93.2
%
   
93.4
%
   
93.8
%
   
93.2
%
25 months
   
88.9
%
   
88.1
%
   
87.8
%
   
86.9
%
   
86.4
%
Number of Life Planners at end of period (2):
                                   
Japan
   
1,944
 
   
1,992
 
   
1,994
 
   
1,985
 
   
2,055
 
All other countries
   
2,055
 
   
2,112
 
   
2,104
 
   
2,222
 
   
2,298
 
    
  
  
  
  
Total
   
3,999
 
   
4,104
 
   
4,098
 
   
4,207
 
   
4,353
 
    
  
  
  
  
Number of International Retail Financial Advisors at end of period
   
646
 
   
633
 
   
632
 
   
634
 
   
618
 
Assets managed or administered for customers outside of the United States at end of period
   
62,642
 
   
64,280
 
   
63,595
 
   
66,921
 
   
70,222
 
 
(1)
 
Excluding Gibraltar Life.
(2)
 
Excluding Gibraltar Life Advisors.

Page 30

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

 
INVESTMENT PORTFOLIO COMPOSITION
 
(in millions)
 
    
September 30, 2002
     
December 31, 2001
  
    
Consolidated
Portfolio (1)
   
Closed
Block
Business
   
Financial Services Businesses
     
Consolidated
Portfolio (1)
   
Closed
Block
Business
   
Financial Services Businesses
  
        
Amount
   
% of Total
           
Amount
   
% of Total
  
Fixed maturities:
                                            
Public available for sale, at fair value
   
89,868
   
30,088
   
59,780
   
58.5
%
   
77,807
   
26,634
   
51,173
   
54.5
%
Public held to maturity, at amortized cost
   
2,328
   
—  
   
2,328
   
2.3
%
   
318
   
—  
   
318
   
0.3
%
Private available for sale, at fair value
   
31,778
   
14,783
   
16,995
   
16.7
%
   
32,040
   
14,428
   
17,612
   
18.8
%
Private held to maturity, at amortized cost
   
45
   
—  
   
45
   
0.1
%
   
53
   
—  
   
53
   
0.1
%
Trading account assets, at fair value
   
138
   
—  
   
138
   
0.1
%
   
112
   
—  
   
112
   
0.1
%
Equity securities, at fair value
   
2,936
   
1,240
   
1,696
   
1.7
%
   
2,259
   
584
   
1,675
   
1.8
%
Commercial loans
   
18,788
   
6,788
   
12,000
   
11.8
%
   
19,176
   
6,106
   
13,070
   
13.9
%
Other long-term investments (2)
   
4,946
   
1,095
   
3,851
   
3.8
%
   
5,095
   
1,082
   
4,013
   
4.3
%
Policy loans, at outstanding balance
   
8,753
   
5,717
   
3,036
   
3.0
%
   
8,570
   
5,758
   
2,812
   
3.0
%
Short term investments, at amortized cost
   
3,640
   
1,558
   
2,082
   
2.0
%
   
4,854
   
1,882
   
2,972
   
3.2
%
    
  
  
  
  
  
  
  
Subtotal
   
163,220
   
61,269
   
101,951
   
100.0
%
   
150,284
   
56,474
   
93,810
   
100.0
%
                   
                 
Invested assets of other entities and operations (3)
   
16,416
   
—  
   
16,416
          
15,550
   
—  
   
15,550
       
    
  
  
         
  
  
      
Total invested assets
   
179,636
   
61,269
   
118,367
          
165,834
   
56,474
   
109,360
       
    
  
  
         
  
  
      
 
Fixed Maturities by Credit Quality(1):
        
September 30, 2002
   
December 31, 2001
        
Financial Services Businesses
   
Financial Services Businesses
        
Amortized
Cost
   
% of Total
     
Estimated
Fair Value
   
Amortized
Cost
   
% of Total
     
Estimated
Fair Value
Public Fixed Maturities:
                                  
NAIC Rating (4)
  
Rating Agency Equivalent
                                  
1
  
Aaa, Aa, A
   
45,310
   
76.4
%
   
47,832
   
36,706
   
72.6
%
   
37,502
2
  
Baa
   
11,282
   
19.0
%
   
11,674
   
11,286
   
22.3
%
   
11,484
3
  
Ba
   
1,775
   
3.0
%
   
1,746
   
1,501
   
3.0
%
   
1,518
4
  
B
   
602
   
1.0
%
   
547
   
683
   
1.4
%
   
646
5
  
C and lower
   
62
   
0.1
%
   
53
   
112
   
0.2
%
   
116
6
  
In or near default
   
268
   
0.5
%
   
261
   
246
   
0.5
%
   
241
        
  
  
  
  
  
   
Total
   
59,299
   
100.0
%
   
62,113
   
50,534
   
100.0
%
   
51,507
        
  
  
  
  
  
Private Fixed Maturities:
                                  
NAIC Rating (4)
  
Rating Agency Equivalent
                                  
1
  
Aaa, Aa, A
   
4,940
   
30.9
%
   
5,422
   
5,982
   
35.1
%
   
6,337
2
  
Baa
   
7,822
   
48.8
%
   
8,402
   
8,148
   
47.8
%
   
8,399
3
  
Ba
   
1,720
   
10.8
%
   
1,759
   
1,487
   
8.7
%
   
1,529
4
  
B
   
747
   
4.7
%
   
698
   
917
   
5.4
%
   
883
5
  
C and lower
   
515
   
3.2
%
   
494
   
390
   
2.3
%
   
401
6
  
In or near default
   
249
   
1.6
%
   
267
   
112
   
0.7
%
   
121
        
  
  
  
  
  
   
Total
   
15,993
   
100.0
%
   
17,042
   
17,036
   
100.0
%
   
17,670
        
  
  
  
  
  
 
(1)
 
Excludes investments of securities brokerage, securities trading, banking operations, assets of our asset management operations managed for third parties, and separate account assets for which the customer assumes risks of ownership.
(2)
 
Other long-term investments consist of real estate and non-real estate related investments in joint ventures and partnerships, investment real estate held through direct ownership, our interest in separate account investments and other miscellaneous investments.
(3)
 
Includes invested assets of securities brokerage, securities trading, and banking operations. Excludes assets of our asset management operations managed for third parties, and separate account assets for which the customer assumes risks of ownership.
(4)
 
Fixed maturity securities designated as NAIC 6 include securities that are not rated.

Page 31

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

 
FINANCIAL SERVICES BUSINESSES INVESTMENT PORTFOLIO COMPOSITION
 
(in millions)
 
    
September 30, 2002
     
December 31, 2001
  
    
Amount
   
% of Total
     
Amount
   
% of Total
  
Japanese Insurance Operations:
                        
Fixed maturities:
                        
Public available for sale, at fair value
   
25,236
   
73.5
%
   
20,883
   
73.8
%
Public held to maturity, at amortized cost
   
2,328
   
6.8
%
   
318
   
1.1
%
Private available for sale, at fair value
   
353
   
1.0
%
   
98
   
0.4
%
Private held to maturity, at amortized cost
   
45
   
0.1
%
   
53
   
0.2
%
Trading account assets, at fair value
   
99
   
0.3
%
   
74
   
0.3
%
Equity securities, at fair value
   
1,038
   
3.0
%
   
1,032
   
3.6
%
Commercial loans
   
3,519
   
10.2
%
   
4,255
   
15.0
%
Other long-term investments (2)
   
1,061
   
3.1
%
   
1,001
   
3.5
%
Policy loans, at outstanding balance
   
672
   
2.0
%
   
605
   
2.1
%
Short term investments, at amortized cost
   
3
   
0.0
%
   
2
   
0.0
%
    
  
  
  
Total
   
34,354
   
100.0
%
   
28,321
   
100.0
%
    
  
  
  
    
September 30, 2002
     
December 31, 2001
  
    
Amount
   
% of Total
     
Amount
   
% of Total
  
Financial Services Businesses excluding Japanese Insurance Operations (1):
                        
Fixed maturities:
                        
Public available for sale, at fair value
   
34,544
   
51.1
%
   
30,290
   
46.2
%
Public held to maturity, at amortized cost
   
—  
   
0.0
%
   
—  
   
0.0
%
Private available for sale, at fair value
   
16,642
   
24.6
%
   
17,514
   
26.7
%
Private held to maturity, at amortized cost
   
—  
   
0.0
%
   
—  
   
0.0
%
Trading account assets, at fair value
   
39
   
0.1
%
   
38
   
0.1
%
Equity securities, at fair value
   
658
   
1.0
%
   
643
   
1.0
%
Commercial loans
   
8,481
   
12.5
%
   
8,815
   
13.5
%
Other long-term investments (2)
   
2,790
   
4.1
%
   
3,012
   
4.6
%
Policy loans, at outstanding balance
   
2,364
   
3.5
%
   
2,207
   
3.4
%
Short term investments, at amortized cost
   
2,079
   
3.1
%
   
2,970
   
4.5
%
    
  
  
  
Total
   
67,597
   
100.0
%
   
65,489
   
100.0
%
    
  
  
  
 
(1)
 
Excludes investments of securities brokerage, securities trading, banking operations, assets of our asset management operations managed for third parties, and separate account assets for which the customer assumes risks of ownership.
(2)
 
Other long-term investments consist of real estate and non-real estate related investments in joint ventures and partnerships, investment real estate held through direct ownership, our interest in separate account investments and other miscellaneous investments.

Page 32

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

 
FINANCIAL SERVICES BUSINESSES INVESTMENT RESULTS
 
(in millions)
 
    
Quarter Ended September 30
  
    
2002
     
2001
  
    
Investment Income
     
Realized
Gains /
(Losses)
     
Investment Income
     
Realized Gains / (Losses)
  
    
Yield(3)
     
Amount
        
Yield(3)
     
Amount
     
Financial Services Businesses (1):
                                          
Fixed maturities
   
5.12
%
   
944
 
   
(119
)
   
5.57
%
   
928
 
   
(262
)
Equity securities
   
4.13
%
   
20
 
   
(12
)
   
0.59
%
   
5
 
   
(113
)
Commercial loans
   
6.75
%
   
209
 
   
4
 
   
6.52
%
   
210
 
   
8
 
Policy loans
   
5.89
%
   
44
 
   
—  
 
   
5.48
%
   
42
 
   
—  
 
Short-term investments and cash equivalents
   
2.14
%
   
47
 
   
3
 
   
2.12
%
   
54
 
   
(1
)
Other investments
   
5.72
%
   
59
 
   
5
 
   
5.21
%
   
51
 
   
54
 
    
  
  
  
  
  
Gross investment income before investment expenses
   
5.10
%
   
1,323
 
   
(119
)
   
5.16
%
   
1,290
 
   
(314
)
Investment expenses
   
-0.25
%
   
(64
)
   
—  
 
   
-0.31
%
   
(77
)
   
—  
 
    
  
  
  
  
  
Subtotal
   
4.85
%
   
1,259
 
   
(119
)
   
4.85
%
   
1,213
 
   
(314
)
    
                
             
Investment results of other entities and operations (2)
          
69
 
   
1
 
          
74
 
   
(2
)
Less amount relating to divested businesses
          
(1
)
   
—  
 
          
1
 
   
—  
 
           
  
         
  
Total
          
1,327
 
   
(118
)
          
1,288
 
   
(316
)
           
  
         
  
    
Nine Months Ended September 30
  
    
2002
     
2001
  
    
Investment Income
     
Realized Gains / (Losses)
     
Investment Income
     
Realized Gains / (Losses)
  
    
Yield(3)
     
Amount
        
Yield(3)
     
Amount
     
Financial Services Businesses (1):
                                          
Fixed maturities
   
5.26
%
   
2,767
 
   
(313
)
   
5.81
%
   
2,899
 
   
(179
)
Equity securities
   
2.50
%
   
33
 
   
(65
)
   
0.55
%
   
11
 
   
(45
)
Commercial loans
   
7.24
%
   
676
 
   
22
 
   
6.56
%
   
567
 
   
19
 
Policy loans
   
5.78
%
   
124
 
   
—  
 
   
5.56
%
   
120
 
   
—  
 
Short-term investments and cash equivalents
   
1.98
%
   
163
 
   
10
 
   
2.72
%
   
195
 
   
(4
)
Other investments
   
5.78
%
   
178
 
   
(155
)
   
6.93
%
   
182
 
   
235
 
    
  
  
  
  
  
Gross investment income before investment expenses
   
5.14
%
   
3,941
 
   
(501
)
   
5.48
%
   
3,974
 
   
26
 
Investment expenses
   
-0.24
%
   
(182
)
   
—  
 
   
-0.37
%
   
(269
)
   
—  
 
    
  
  
  
  
  
Subtotal
   
4.90
%
   
3,759
 
   
(501
)
   
5.11
%
   
3,705
 
   
26
 
    
                
             
Investment results of other entities and operations (2)
          
196
 
   
—  
 
          
243
 
   
(2
)
Less amount relating to divested businesses
          
(21
)
   
—  
 
          
(7
)
   
—  
 
           
  
         
  
Total
          
3,934
 
   
(501
)
          
3,941
 
   
24
 
           
  
         
  
 
(1)
 
Excludes investments of securities brokerage, securities trading, banking operations, assets of our asset management operations managed for third parties, and separate account assets for which the customer assumes risks of ownership.
(2)
 
Investment income of securities brokerage, securities trading, and banking operations.
(3)
 
Yields are annualized and based on quarterly average carrying values except for fixed maturities, equity securities and commercial loans. Yields for fixed maturities are based on amortized cost. Yields for equity securities are based on cost. Yields for commercial loans are calculated gross of any allowance for losses on commercial loans. Results for periods subsequent to the first quarter of 2001 reflect investments of Gibraltar Life, which was acquired in April 2001.

Page 33

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

 
FINANCIAL SERVICES BUSINESSES INVESTMENT RESULTS—JAPANESE INSURANCE OPERATIONS
 
(in millions)
 
    
Quarter Ended September 30
  
    
2002
     
2001
  
    
Investment Income
     
Realized
Gains /
(Losses)
     
Investment Income
     
Realized Gains / (Losses)
  
    
Yield(1)
     
Amount
        
Yield(1)
     
Amount
     
Japanese Insurance Operations:
                                          
Fixed maturities
   
2.22
%
   
148
 
   
(4
)
   
1.48
%
   
80
 
   
(37
)
Equity securities
   
1.43
%
   
4
 
   
(42
)
   
0.07
%
   
1
 
   
(115
)
Commercial loans
   
4.16
%
   
40
 
   
4
 
   
4.37
%
   
63
 
   
11
 
Policy loans
   
2.80
%
   
5
 
   
—  
 
   
1.04
%
   
2
 
   
—  
 
Short-term investments and cash equivalents
   
0.22
%
   
1
 
   
2
 
   
0.14
%
   
2
 
   
—  
 
Other investments
   
-3.88
%
   
(14
)
   
12
 
   
1.43
%
   
4
 
   
115
 
    
  
  
  
  
  
Gross investment income before investment expenses
   
2.17
%
   
184
 
   
(28
)
   
1.73
%
   
152
 
   
(26
)
Investment expenses
   
-0.17
%
   
(15
)
   
—  
 
   
-0.10
%
   
(9
)
   
—  
 
    
  
  
  
  
  
Total
   
2.00
%
   
169
 
   
(28
)
   
1.63
%
   
143
 
   
(26
)
    
  
  
  
  
  
    
Nine Months Ended September 30
  
    
2002
     
2001
  
    
Investment Income
     
Realized
Gains /
(Losses)
     
Investment Income
     
Realized Gains / (Losses)
  
    
Yield(1)
     
Amount
        
Yield(1)
     
Amount
     
Japanese Insurance Operations:
                                          
Fixed maturities
   
1.97
%
   
358
 
   
(8
)
   
1.18
%
   
148
 
   
(20
)
Equity securities
   
0.90
%
   
7
 
   
(115
)
   
0.22
%
   
3
 
   
(97
)
Commercial loans
   
4.27
%
   
126
 
   
18
 
   
4.28
%
   
117
 
   
11
 
Policy loans
   
2.72
%
   
13
 
   
—  
 
   
1.22
%
   
7
 
   
—
 
Short-term investments and cash equivalents
   
0.51
%
   
6
 
   
10
 
   
0.08
%
   
2
 
   
1
 
Other investments
   
-1.56
%
   
(15
)
   
(42
)
   
2.59
%
   
13
 
   
127
 
    
  
  
  
  
  
Gross investment income before investment expenses
   
2.03
%
   
495
 
   
(137
)
   
1.54
%
   
290
 
   
22
 
Investment expenses
   
-0.13
%
   
(32
)
   
—  
 
   
-0.08
%
   
(16
)
   
—
 
    
  
  
  
  
  
Total
   
1.90
%
   
463
 
   
(137
)
   
1.46
%
   
274
 
   
22
 
    
  
  
  
  
  
 
(1)
 
Yields are annualized and based on quarterly average carrying values except for fixed maturities, equity securities and commercial loans. Yields for fixed maturities are based on amortized cost. Yields for equity securities are based on cost. Yields for commercial loans are calculated gross of any allowance for losses on commercial loans. Results for periods subsequent to the first quarter of 2001 reflect investments of Gibraltar Life, which was acquired in April 2001.

Page 34

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

 
FINANCIAL SERVICES BUSINESSES INVESTMENT RESULTS—EXCLUDING JAPANESE INSURANCE OPERATIONS
 
(in millions)
 
    
Quarter Ended September 30
  
    
2002
     
2001
  
    
Investment Income
     
Realized Gains / (Losses)
     
Investment Income
     
Realized Gains / (Losses)
  
    
Yield(2)
     
Amount
        
Yield(2)
     
Amount
     
Financial Services Businesses excluding Japanese Insurance Operations (1):
                                          
Fixed maturities
   
6.77
%
   
796
 
   
(115
)
   
7.55
%
   
848
 
   
(225
)
Equity securities
   
7.78
%
   
16
 
   
30
 
   
1.50
%
   
4
 
   
2
 
Commercial loans
   
7.91
%
   
169
 
   
—  
 
   
8.25
%
   
147
 
   
(3
)
Policy loans
   
6.75
%
   
39
 
   
—  
 
   
6.71
%
   
40
 
   
—  
 
Short-term investments and cash equivalents
   
2.22
%
   
46
 
   
1
 
   
3.16
%
   
52
 
   
(1
)
Other investments
   
10.26
%
   
73
 
   
(7
)
   
6.80
%
   
47
 
   
(61
)
    
  
  
  
  
  
Gross investment income before investment expenses
   
6.52
%
   
1,139
 
   
(91
)
   
7.00
%
   
1,138
 
   
(288
)
Investment expenses
   
-0.28
%
   
(49
)
   
—  
 
   
-0.43
%
   
(68
)
   
—  
 
    
  
  
  
  
  
Total
   
6.24
%
   
1,090
 
   
(91
)
   
6.57
%
   
1,070
 
   
(288
)
    
  
  
  
  
  
    
Nine Months Ended September 30
  
    
2002
     
2001
  
    
Investment Income
     
Realized Gains / (Losses)
     
Investment Income
     
Realized Gains / (Losses)
  
    
Yield(2)
     
Amount
        
Yield(2)
     
Amount
     
Financial Services Businesses excluding Japanese Insurance Operations (1):
                                          
Fixed maturities
   
7.01
%
   
2,409
 
   
(305
)
   
8.08
%
   
2,751
 
   
(159
)
Equity securities
   
5.04
%
   
26
 
   
50
 
   
1.21
%
   
8
 
   
52
 
Commercial loans
   
8.61
%
   
550
 
   
4
 
   
9.40
%
   
450
 
   
8
 
Policy loans
   
6.63
%
   
111
 
   
—  
 
   
6.74
%
   
113
 
   
—  
 
Short-term investments and cash equivalents
   
2.21
%
   
157
 
   
—  
 
   
4.40
%
   
193
 
   
(5
)
Other investments
   
8.83
%
   
193
 
   
(113
)
   
8.78
%
   
169
 
   
108
 
    
  
  
  
  
  
Gross investment income before investment expenses
   
6.59
%
   
3,446
 
   
(364
)
   
7.54
%
   
3,684
 
   
4
 
Investment expenses
   
-0.29
%
   
(150
)
   
—  
 
   
-0.53
%
   
(253
)
   
—  
 
    
  
  
  
  
  
Total
   
6.30
%
   
3,296
 
   
(364
)
   
7.01
%
   
3,431
 
   
4
 
    
  
  
  
  
  
 
(1)
 
Excludes investments of securities brokerage, securities trading, banking operations, assets of our asset management operations managed for third parties, and separate account assets for which the customer assumes risks of ownership.
(2)
 
Yields are annualized and based on quarterly average carrying values except for fixed maturities, equity securities and commercial loans. Yields for fixed maturities are based on amortized cost. Yields for equity securities are based on cost. Yields for commercial loans are calculated gross of any allowance for losses on commercial loans.

Page 35

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

 
RECLASSIFIED STATEMENTS OF OPERATIONS—FINANCIAL SERVICES BUSINESSES
 
(in millions)
 
Year ended December 31
      
2001
  
2002
2000
      
1Q
  
2Q
  
3Q
  
4Q
  
1Q
  
2Q
  
3Q
   
Revenues (1):
                            
5,826
  
Premiums
  
1,611
  
2,014
  
2,241
  
2,361
  
2,278
  
2,334
  
2,386
1,639
  
Policy charges and fee income
  
392
  
483
  
474
  
454
  
434
  
412
  
400
5,229
  
Net investment income
  
1,299
  
1,354
  
1,288
  
1,303
  
1,251
  
1,356
  
1,327
5,196
  
Commissions, investment management fees, and other income
  
1,108
  
1,164
  
992
  
1,092
  
1,095
  
1,057
  
1,011
     
 
 
 
 
 
 
17,890
  
Total revenues
  
4,410
  
5,015
  
4,995
  
5,210
  
5,058
  
5,159
  
5,124
     
 
 
 
 
 
 
   
Benefits and Expenses (1):
                            
6,103
  
Insurance and annuity benefits
  
1,611
  
2,073
  
2,279
  
2,296
  
2,206
  
2,317
  
2,326
1,618
  
Interest credited to policyholders' account balances
  
382
  
422
  
432
  
434
  
414
  
415
  
434
448
  
Interest expense
  
108
  
100
  
70
  
48
  
56
  
50
  
50
(1,192)
  
Deferral of acquisition costs
  
(313)
  
(343)
  
(325)
  
(344)
  
(340)
  
(358)
  
(370)
834
  
Amortization of acquisition costs
  
242
  
212
  
255
  
224
  
239
  
273
  
358
3,454
  
Securities operations non-interest expenses
  
817
  
875
  
771
  
816
  
722
  
731
  
687
4,899
  
General and administrative expenses
  
1,085
  
1,309
  
1,253
  
1,558
  
1,233
  
1,249
  
1,212
     
 
 
 
 
 
 
16,164
  
Total benefits and expenses
  
3,932
  
4,648
  
4,735
  
5,032
  
4,530
  
4,677
  
4,697
     
 
 
 
 
 
 
                                 
1,726
  
Adjusted operating income before income taxes
  
478
  
367
  
260
  
178
  
528
  
482
  
427
     
 
 
 
 
 
 
   
Items excluded from adjusted operating income before income taxes:
                            
(379)
  
Realized investment gains (losses), net of related adjustments
  
247
  
82
  
(326)
  
(165)
  
(101)
  
(339)
  
(141)
(29)
  
Related charges
  
(4)
  
(7)
  
4
  
33
  
5
  
(4)
  
(1)
     
 
 
 
 
 
 
(408)
  
Total realized investment losses, net of related adjustments
  
243
  
75
  
(322)
  
(132)
  
(96)
  
(343)
  
(142)
     
 
 
 
 
 
 
(636)
  
Divested businesses
  
(22)
  
(60)
  
(40)
  
(25)
  
(8)
  
10
  
(14)
(143)
  
Demutualization costs and expenses
  
(45)
  
(117)
  
(37)
  
(389)
  
—  
  
—  
  
—  
     
 
 
 
 
 
 
(1,187)
  
Total items excluded from adjusted operating income before income taxes
  
176
  
(102)
  
(399)
  
(546)
  
(104)
  
(333)
  
(156)
     
 
 
 
 
 
 
539
  
Income (loss) from continuing operations before income taxes
  
654
  
265
  
(139)
  
(368)
  
424
  
149
  
271
302
  
Income tax expense (benefit)
  
248
  
11
  
(194)
  
48
  
158
  
51
  
(106)
     
 
 
 
 
 
 
237
  
Income (loss) from continuing operations,
after-tax
  
406
  
254
  
55
  
(416)
  
266
  
98
  
377
     
 
 
 
 
 
 
 
(1)
 
Revenues exclude realized investment gains, net of losses and related adjustments, and revenues of divested businesses. Benefits and expenses exclude charges related to realized investment gains, net of losses, benefits and expenses of divested businesses, and demutualization costs and expenses.

Page 36

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

 
RECLASSIFIED STATEMENTS OF OPERATIONS—CORPORATE AND OTHER OPERATIONS
 
(in millions)
 
Year ended December 31
      
2001
  
2002
2000
      
1Q
  
2Q
  
3Q
  
4Q
  
1Q
  
2Q
  
3Q
                                 
   
Revenues (1):
                            
15
  
Premiums
  
2
  
—  
  
10
  
29
  
2
  
(2)
  
(3)
(10)
  
Policy charges and fee income
  
—  
  
(4)
  
(1)
  
(2)
  
—  
  
(6)
  
(3)
846
  
Net investment income
  
199
  
216
  
132
  
166
  
144
  
183
  
159
(317)
  
Commissions, investment management fees, and other income
  
(132)
  
4
  
(117)
  
(63)
  
(47)
  
(79)
  
(23)
     
 
 
 
 
 
 
534
  
Total revenues
  
69
  
216
  
24
  
130
  
99
  
96
  
130
                                 
     
 
 
 
 
 
 
   
Benefits and Expenses (1):
                            
27
  
Insurance and annuity benefits
  
7
  
9
  
11
  
12
  
27
  
31
  
—  
(3)
  
Interest credited to policyholders' account balances
  
(1)
  
1
  
1
  
—  
  
—  
  
—  
  
—  
385
  
Interest expense
  
98
  
87
  
60
  
44
  
53
  
46
  
48
105
  
Deferral of acquisition costs
  
26
  
23
  
17
  
16
  
19
  
21
  
12
(84)
  
Amortization of acquisition costs
  
(21)
  
(20)
  
(21)
  
(20)
  
(20)
  
(25)
  
(21)
38
  
Securities operations non-interest expenses
  
8
  
11
  
(7)
  
8
  
1
  
(7)
  
4
23
  
General and administrative expenses
  
(47)
  
28
  
(36)
  
94
  
(4)
  
(19)
  
(34)
     
 
 
 
 
 
 
491
  
Total benefits and expenses
  
70
  
139
  
25
  
154
  
76
  
47
  
9
     
 
 
 
 
 
 
43
  
Adjusted operating income before income taxes
  
(1)
  
77
  
(1)
  
(24)
  
23
  
49
  
121
     
 
 
 
 
 
 
 
(1)
 
Revenues exclude realized investment gains, net of losses and related adjustments, and revenues of divested businesses. Benefits and expenses exclude charges related to realized investment gains, net of losses, benefits and expenses of divested businesses, and demutualization costs and expenses.

Page 37

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

 
KEY DEFINITIONS AND FORMULAS
 
1. Attributed Equity:
 
Amount of capital assigned to each of the Company's segments for purposes of measuring segment adjusted operating income before income taxes, established at a level which management considers necessary to support the segment's risks. Attributed equity for the Financial Services Businesses represents all of the Company's equity that is not included in the Closed Block Business.
 
2. Adjusted operating income before income taxes:
 
Adjusted operating income is a non-GAAP measure that excludes realized investment gains, net of losses and related adjustments; results of divested businesses and discontinued operations; and demutualization costs and expenses. Revenues and benefits and expenses shown as components of adjusted operating income, and for the divisions of the Financial Services Businesses, are presented on the same basis as pre-tax adjusted operating income and exclude these items as well. Adjusted operating income should not be viewed as a substitute for net income determined in accordance with GAAP, and our definition of adjusted operating income may differ from that used by other companies. The excluded items are important to an understanding of our overall results of operations. However, we believe that the presentation of adjusted operating income as we measure it for management purposes enhances the understanding of our results of operations by highlighting the results from ongoing operations and the underlying profitability factors of our businesses.
 
3. After-tax adjusted operating income:
 
Adjusted operating income before taxes, as defined above, less the income tax effect applicable to adjusted operating income before taxes.
 
4. Assets Under Management:
 
Fair market value or account value of assets which Prudential manages directly in proprietary products, such as mutual funds and variable annuities, in separate accounts, wrap-fee products and the general account, and assets invested in investment options included in the Company's products that are managed by third party sub-managers (i.e., the non-proprietary investment options in the Company's products).
 
5. Book value per share of Common Stock:
 
Equity attributed to Financial Services Businesses divided by number of Common shares outstanding at end of period, on a diluted basis.
 
6. Borrowings—General Corporate Purposes:
 
Amounts used for corporate purposes including uses for cash flow timing mismatches, and investments in equity and debt securities of subsidiaries including amounts needed for regulatory capital purposes.
 
7. Borrowings—Investment Related:
 
Debt issued to finance specific investment assets or portfolios of investment assets, including real estate, real estate related assets held in consolidated joint ventures, and institutional spread lending portfolios.
 
8. Borrowings—Securities Business Related:
 
Debt issued to finance primarily the liquidity of our broker-dealers, and our capital markets and other securities business related operations.
 
9. Borrowings—Specified Other Businesses:
 
Borrowings associated with consumer banking activities, real estate franchises, and relocation services.
 
10. Client Assets:
 
Fair market value of assets in client accounts of Prudential Securities and Prudential Bank, and trust client accounts, that are not included in Assets Under Management. Prudential does not receive a management or administrative fee on these assets, but may receive a fee for executing trades, custody or recordkeeping services.

Page 38

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

 
KEY DEFINITIONS AND FORMULAS
 
11. Earned Premiums:
 
The portion of a premium, net of any amount ceded, that represents coverage already provided or that belongs to the insurer based on the part of the policy period that has passed.
 
12. Earnings Per Share of Common Stock:
 
Prudential Financial, Inc.'s initial public offering and the demutualization of The Prudential Insurance Company of America became effective on December 18, 2001. For the 2001 periods, earnings per share data are presented on a pro forma basis that assumes that shares issued in the initial public offering, including those issued as a result of the subsequent exercise by underwriters of options to acquire additional shares, and shares distributed as demutualization consideration to policyholders, were outstanding for all such periods. Earnings used in per-share calculations for the 2001 periods have not been adjusted to reflect the demutualization or related transactions, including the establishment of the Closed Block Business. For periods subsequent to 2001, earnings per share is based on the weighted average number of diluted shares outstanding. Stock options are included in the number of diluted shares for the periods they are outstanding based on the treasury stock method. Net income for the Financial Services Businesses and the Closed Block Business is determined in accordance with GAAP and includes general and administrative expenses charged to each of the businesses based on the Company's methodology for allocation of such expenses. For periods subsequent to the date of demutualization, the net income of each business is modified for cash flows between the Financial Services Businesses and the Closed Block Business related to administrative expenses, which are determined by a policy servicing fee arrangement that is based upon insurance in force and statutory cash premiums. To the extent actual administrative expenses vary from these cash flow amounts, these differences are recorded, on an after-tax basis, as direct equity adjustments to the equity balances of each business. The direct equity adjustments are used to adjust net income to determine the earnings available to the Common Stock and the Class B Stock for earnings per share purposes.
 
13. Financial Advisors (Domestic and International):
 
Financial advisors and securities brokers in our securities operations.
 
14. Financial Advisor Productivity (Domestic):
 
Financial Advisory segment total non-interest revenues, excluding revenues generated by the consumer bank and by the segment's retail fixed income and equity securities trading operations, divided by the average number of domestic retail Financial Advisors for the period. For interim reporting periods, the productivity measures are annualized.
 
15. General Account:
 
Invested assets and policyholder liabilities and reserves for which the Company bears the investment risk. Excludes assets recognized for statutory purposes that are specifically allocated to a separate account. General account assets also include assets of the parent company, Prudential Financial, Inc.
 
16. Gibraltar Life Advisors:
 
Insurance representatives for Gibraltar Life.
 
17. Group Life Insurance and Group Disability Insurance Administrative Operating Expense Ratios:
 
Ratio of administrative operating expenses (excluding commissions) to gross premiums, policy charges and fee income.
 
18. Group Life Insurance and Group Disability Insurance Benefits Ratios:
 
Ratio of policyholder benefits to earned premiums, policy charges and fee income.
 
19. Insurance and Annuity Benefits:
 
Total death benefits, annuity benefits, disability benefits, other policy benefits, losses and loss adjustment expenses paid or incurred, under insurance and annuity contracts, plus the change in reserves for future policy benefits, losses and loss adjustment expenses.
 
20. International Life Planners:
 
Insurance agents in our insurance operations outside the United States, excluding Gibraltar Life Advisors.

Page 39

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

 
KEY DEFINITIONS AND FORMULAS
 
21. New annualized premiums:
 
Premiums from new sales that are expected to be collected over a one year period. Group insurance new annualized premiums exclude new premiums resulting from rate changes on existing policies, from additional coverage under our Servicemembers' Group Life Insurance contract, and from excess premiums on group universal life insurance that build cash value but do not purchase face amounts.
 
22. Non-recourse and Limited-recourse Debt:
 
Limited and non-recourse borrowing is where the holder is entitled to collect only against the assets pledged to the debt as collateral or has only very limited rights to collect against other assets.
 
23. Operating return on average equity:
 
Adjusted operating income after tax (giving effect to the direct equity adjustment for earnings per share calculation), annualized for interim periods, divided by average attributed equity for the Financial Services Businesses excluding unrealized gains and losses on investments.
 
24. Policy Persistency—Group Insurance:
 
Percentage of the premiums in force at the end of the prior year that are still in force at the end of the period (excluding Servicemembers' Group Life Insurance and Prudential Employee Benefit Plan).
 
25. Policy Persistency—International Insurance:
 
13 month persistency represents the percentage of policies issued that are still in force at the beginning of their second policy year. 25 month persistency represents the percentage of policies issued that are still in force at the beginning of their third policy year.
 
26. Prudential Agents:
 
Insurance agents in our insurance operations in the United States.
 
27. Prudential Agent productivity:
 
Commissions on new sales of all products by Prudential Agents under contract for the entire period, divided by the number of those Prudential Agents. Excludes commissions on new sales by Prudential Agents hired or departed during the period. For interim reporting periods, the productivity measures are annualized.
 
28. Ratio of corporate debt to total capitalization:
 
For purposes of this ratio, we measure "debt" as the sum of borrowings for general corporate purposes and 20% of the stated aggregate liquidation amount of the Equity Security Units, and we measure "total capitalization" as the sum of equity excluding unrealized gains and losses on available-for-sale securities, corporate debt and the stated aggregate liquidation amount of the Equity Security Units. The ratio is calculated by dividing debt by total capitalization.
 
29. Redeemable Capital Securities:
 
Capital Trust Certificates of Prudential Financial Capital Trust I (element of Equity Security Units).
 
30. Separate Accounts:
 
Assets of our insurance companies allocated under certain policies and contracts that are segregated from the general account and other separate accounts. The policyholder or contractholder predominantly bears the risk of investments held in a separate account.
 
31. Wrap-Fee Products:
 
Investment products generating asset-based fees in which the funds of the customer are generally invested in other investment products such as mutual funds.

Page 40

Prudential Financial, Inc.
    
Quarterly Financial Supplement
  
LOGO
Third Quarter 2002
    

 
RATINGS AND INVESTOR INFORMATION
 
INSURANCE CLAIMS PAYING RATINGS
as of November 5, 2002
    
A.M.Best
     
Standard & Poor's
     
Moody's
     
Fitch Ratings
The Prudential Insurance Company of America
   
A
     
A+
     
A1
     
AA-
PRUCO Life Insurance Company
   
A
     
A+
     
A1
     
NR*
PRUCO Life Insurance Company of New Jersey
   
A
     
A+
     
A1
     
NR
Prudential Property and Casualty Insurance Company
   
A-
     
A-
     
A2
     
NR
The Prudential Property & Casualty Insurance Company of New Jersey
   
A-
     
NR
     
NR
     
NR
The Prudential Life Insurance Co., Ltd. (Prudential of Japan)
   
A+
     
AA-
     
NR
     
NR
Gibraltar Life Insurance Company, Ltd.
   
NR
     
A
     
A2
     
NR
CREDIT RATINGS:
as of November 5, 2002
                          
Prudential Financial, Inc.:
                          
Short-Term Borrowings
   
AMB-1
     
A2
     
P2
     
F1
Long-Term Senior Debt
   
a-
     
A-
     
A3
     
A
Redeemable Capital Securities
   
a-
     
A-
     
A3
     
A
The Prudential Insurance Company of America :
                          
Capital and surplus notes, due 2003-2025
   
a-
     
A-
     
A3
     
NR
Prudential Funding, LLC:
                          
Commercial Paper
   
AMB-1
     
A1
     
P1
     
NR
Long-Term Senior Debt
   
a
     
A+
     
A2
     
NR
Prudential Securities Group, Inc
   
NR
     
BBB
     
NR
     
NR
* NR indicates not rated.
                          
INVESTOR INFORMATION:
                          
Corporate Offices:
   
Investor Information Hotline:
Prudential Financial, Inc.
751 Broad Street
Newark, New Jersey 07102
   
Dial 877-998-ROCK for additional printed information or inquiries.
    
Web Site:
    
www.prudential.com
Publicly Traded Securities:
     
Common Stock of Prudential Financial, Inc. is traded on the New York Stock Exchange under the symbol PRU.
                          
Equity Security Units of Prudential Financial, Inc. are traded on the New York Stock Exchange under the symbol PFA.
                          
 
 

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